Don’t let the festive season come as a shock: planning tips for SMEs

December, and the run up to the holidays and the festive season, is a sales boost for retail and hospitality businesses, while for those in manufacturing and construction it is an opportunity to take a well-earned extended break.

Regardless of the sector in which you operate, planning for the festive season should be a priority, says Sudir Sahadeo, an area manager for the coastal branch of Business Partners Limited, based in Durban. “One of the clients in my portfolio called me towards the end of November last year in a panic, needing emergency funding to meet the orders that some of his blue-chip retail customers had placed for the squashes, cordials and juices he manufactures and distributes. He had completely underestimated the festive season demand and needed almost R1 million to buy the stock he needed to fill orders.”

Fortunately, the business owner was an established Business Partners Limited client and Sudir was able to arrange the loan he needed. But it could so easily have gone the other way, which is why planning is so important.

Sudir shares these 10 tips:

1. Update your cash flow budget and forecast to account for the fewer business days in December, especially if you are in the manufacturing, construction or logistics sectors that shut down in mid-December and only reopen in the second week of January. If you are in retail or hospitality, you might need to budget to pay overtime to staff members who have to work on public holidays.
2. Your financial planning should also include any bonus or holiday payments for your staff In fact, to be sure that your cash flow will cover 13^th cheques or bonuses, it would be wise to start building up a kitty earlier in the year for 2024.
3. Budget carefully for year-end expenses such as a function for your staff and/or thank-you gifts for your most valued customers. This will prevent you from getting swept up in the festive spirit and going overboard. Remember that you need enough cash flow to kickstart your activities when you reopen in the new year.
4. Make sure that your customers and other debtors pay you before they close for the holidays, so that your cash flow does not suffer into the new year. This is particularly relevant if your debtor cycle has been set up for payments to come in at the end of the month.
5. The retail industry cashes in during the festive period, but that does not happen automatically. Strategise sales tactics for December in advance to ensure you remain competitive. There are countless good deals out there to entice customers, hence you need to have your own competitive advantage to bring feet through the door.
6. Prepare your staff for the festive season. Make sure everyone on the floor understands the sales strategy and tactics and is prepared to interact with customers accordingly.
7. In retail and hospitality specifically, make sure you have enough boots on the ground to attend to increased numbers of customers in your store, restaurant or similar establishment. It is critical to maintain and even improve your service levels; if not, you could lose out on the increased foot traffic.
8. Working capital is even more important than usual over the festive season. No retailer or restaurant can afford to run out of stock, as can no supplier. Budget for additional working capital to not only see you through the December demand, but also into the new year. Consider Short-Term Finance from Business Partners Ltd.
9. Get all your invoicing done by the middle of the month at the latest (remember that in 2023, 15 December is a public holiday, so aim for the 14^th). Consider offering customers a small discount – a maximum of 2.5% should do it – to encourage payment before you close. However, it is also a good idea to stagger payments. It will help your January cash flow if some customers pay by mid-December and others at the end of the month as usual. Keep this in mind as you consider how to offer incentive discounts.
10. Finally, let your customers know well in advance when you plan to close, so that they can do their planning too. If not, you stand to lose out on business and, even more seriously, your customers’ trust, loyalty and goodwill.