SMEs must prepare now for the Christmas hit

Businesses need to make preparations now for a difficult Christmas period due to the annual slowdown coupled with a year of predicted slow growth that’s here to stay.

Roger Mendelson, CEO of Prushka Fast Debt Recovery, says businesses are starting their Christmas wind-down earlier this year therefore business-to-business SMEs must start making plans for an extended quiet holiday period.

"Christmas is always a challenging time for business-to-business SMEs as most of their clients close down until late January, significantly reducing their cash flow. This year it appears to be starting even earlier," he said.

"It has been over 26 years since Australia’s last recession, so the cycle is overdue and, with low profitability, banks won’t be offering lifelines to businesses that fall on hard times. It’s imperative that SMEs review their cash flow now or risk collapse in the New Year.

"Too often they leave planning until they really feel the post-Christmas pressure in February and March but by then it’s already too late. They’re chasing their tails.

"March is the graveyard month for SMEs – it’s the most common time for insolvencies."

The Australian Securities and Investment Commission’s annual report recently found small businesses were the most likely to collapse into insolvency, with 80 per cent of businesses that closed having less than $100,000 in assets and 79 per cent having fewer than 20 employees.

Mr Mendelson says he expects business confidence to drop in the coming months and predicts that next year will be difficult for small businesses.

Prushka offers the following checklist for businesses to protect themselves ahead of Christmas:

  • Assess your cash flow and make arrangements now if you need support from your bank

  • Get bills out as soon as possible to ensure businesses make payment before they close down

  • Focus on completing current orders and billing them rather than getting new orders

  • When ordering equipment and supplies, specify you won’t be paying until mid-February

  • Get on the phone and speak to customers whose accounts are overdue and get promises to pay

  • Offer discounts on accounts which are paid a few days before Christmas

  • Defer any purchases which can be held off until after Christmas

  • Go through old and written off accounts and refer them to a collection agency as soon as possible.