The festive season is a challenging period for businesses across many sectors. Variations in operational costs and demand create a volatile and unstable environment that can be detrimental if not effectively managed.
At Optima Partners, we’ve routinely helped businesses navigate festive season challenges. We’ve put together a list of the most common hurdles for businesses, and actionable methods to overcoming them.
Sales fluctuations
The festive season means different things for different businesses.
For businesses in the retail or hospitality sectors, the festive season likely looms as the busiest period of the year. For businesses in financial or educational sectors however, it can signal a significant slowdown.
In either case, the holidays present a unique challenge that requires keen awareness and careful planning to address. The perceived impact of the holiday season on your business, and your plan to address it, will have a cascading effect on business performance.
Utilise historical data and market trends available to your business to forecast the potential impact of the holiday season on sales and cash flow, and plan accordingly.
Employee costs and payroll
Bonuses, holiday parties and leave requests can pose a heavy burden on your bottom line if not properly considered.
If your business is experiencing increased traffic, you may need to allocate additional funds towards payroll, or vice versa in the case of a slow festive period.
Ensure that your payroll systems are updated to account for any bonuses or additional payments for your employees, and that you set expectations with your employees well in advance to avoid disputes.
Inventory management
Your business’ inventory management strategy will depend on how the festive season impacts business traffic.
If the holiday period incurs an increase in sales, then it incurs additional inventory costs which will need to be allotted for.
If the holiday period is slow, there is little point allocating additional funds to inventory that’s unlikely to be sold or utilised.
Operating costs
It’s common for businesses to adjust their operating hours during the festive season, either increasing or decreasing depending on demand.
This can be an effective strategy for addressing festive season challenges, however careful consideration is required to strike the right balance.
Changes in operating hours will impact your operational costs, including payroll. Ensure that you have analysed your figures and forecasted carefully to determine whether changing operating hours will deliver a net benefit.
Tax obligations
The festive season presents many compliance challenges, as well as opportunities for tax-efficiency.
It’s prudent for businesses to maintain compliance regarding pay rates, fringe benefits tax and enterprise agreements, which often present significant hurdles for businesses in this period. Ensure that you are aware of your obligations as an employer and business owner, and maintain records for your reports.
To maximise your tax-efficiency during this period, ensure that you are monitoring allowable deductions, timing major business investments with cash flow, and understand the impact of any business financing or loans.
Cash flow management
Good cash flow management is the secret to surviving the festive period. If you have implemented robust forecasts, you can utilise them to create thorough business plans to manage your cash flow through multiple scenarios.
If you anticipate that the festive season will increase cash flow, you can allocate extra funds and resources to additional staffing, inventory and operational costs.
If the festive season will likely result in a slowdown for your business, you can take a conservative approach and scale down to maximise profit.
If you’re experiencing difficulties with your cash-flow, or having challenges over the festive season, Optima Partners can help.
Contact us at info@optimapartners.com.au or click here.
