As Christmas approaches, some business owners are rubbing their hands together and others face the festive season with dread.

Christmas is traditionally a time for increased spending, which is good for certain retailers, but for many businesses it’s a time of volatility, reduced revenues and increased costs.

With the current cost of living crisis, retailers will be fighting for every dollar of retail spend as consumers look for value to justify their Christmas outlays.

Business costs tend to increase over the Christmas period. Those in retail and hospitality need more staff, and usually employ these at a higher casual rate, on top of holiday and overtime loading. Promotional costs, increased stock levels and greater energy costs will further contribute to cash flow pressures.

Stock control is essential over the holiday period. Increasing stock levels to match demand is essential, but the risk is getting left with excess and out of season stock in the new year. Working with short-notice suppliers can assist here, as well as providing on-line options to order stock not available in-store.

After the festive flurry, the first quarter in the new year can be a slow one for retailers, so some careful cash flow projections are required to make sure you can navigate through that period. 

Some businesses choose to shut down over the festive period, and besides reducing revenue, this means paying out additional costs such as accrued holiday pay and leave loading. Businesses can use automated debtor reminders and utilise other technology to automate administrative duties and reduce costs, as well as turning off or reducing non-essential services during the break. 

If you’re looking to more permanently trim the budget, the first thing to look for is unnecessary expenditure. Almost every business has something in this category, whether it’s a forgotten software trial subscription, some excessive entertainment costs or a work vehicle that’s more about form than substance. Locate these and eliminate them.

The next step is to eyeball your essential expenses and find ways to reduce them. This involves negotiating with your current suppliers or finding new ones. Consider your banking arrangements, insurance, software, IT services, phones and maintenance contracts? The best way to approach this project is to take a deep dive into your general ledger and question every significant supplier relationship.

The third stage is to look for efficiency gains. Don’t blindly do what you’ve always done. Converting to electronic communications reduces postage. Creating an on-line ordering system saves the disruption of taking phone calls and improves accuracy. What about putting solar panels on the roof to reduce power costs?

Don’t wait for Christmas to trigger your cost reduction program – it’s a good idea 365 days a year.

by MARK DOUGLAS
FCPA
Managing Partner of Francis A Jones
www.faj.com.au