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Christmas and cash flow

Challenges for businesses and households

After a challenging year for many, the 2021 festive period is looking bright. With lockdowns and border closures coming to an end, many businesses are set to return to normal trading and families to be reunited.

Although there is much to celebrate, there are important cash flow challenges that both businesses and households need to consider to avoid potential financial stress during this time.


Seasonal inventory requirements

It is estimated that Australian’s will spend $58billion in Christmas sales this year (Source: Australian Retail Association). To meet the demand of this peak season and ensure they don’t miss out on sales, businesses will increase their inventory. This large financial cash outflow is fine if properly forecast for, but if planning hasn’t occurred or if finances are tight, the weeks or months it can take the business to make the sales required to generate a profit could result in them struggling to meet other financial commitments in the meantime, like rent and wages.

Global supply chain issues increasing prices

It’s no secret that we are experiencing supply chain issues globally off the back of the COVID pandemic. Due to the shortage of electronic components and the ongoing shipping constraints and costs, both businesses and households are seeing a huge increase in the price of some goods. As these increases were largely unforeseen, they will not have been budgeted for and will require businesses and households to adjust and carefully consider their cash outflows.

Staff leave and holiday closures

We all love a break over the holiday period. Many SME owners shut up shop to enjoy the time with their friends and family, and employees take a well-deserved break to do the same – just like it should be.
In the same way businesses need to properly forecast for seasonal increases in inventory, they also must plan to pay staff leave and maybe even leave loading whilst the business is generating fewer sales – or even no sales at all. Failure to do so will have a negative impact on their cash flow.

Bottle-necked finances for households

Presents. Food. Alcohol. Travel. All things we like to enjoy over the festive period, but the cost adds up quickly. Big spending over Christmas can leave our household finances in the red – add in a bill or two (i.e. rates, house/car insurance, electricity) and you can be left with a large financial hangover well into the new year.

How a premium funding solution can help

With proper forecasting and the use of cash flow positive tools, the negative cash flow impacts the festive season can have on businesses and households can be alleviated. One such tool is a premium funding solution.

A premium funding solution reduces the negative cash flow impact paying insurance premiums upfront can cause a business or household, by spreading the large lump sum payment out over the course of the year. By breaking down insurance premiums into more manageable monthly payments, businesses and households can reduce the pressure insurance costs can have on their cash flow.

As we progress into the festive period, it is timely to consider if the time is right to consider a premium funding solution for your business or household.

To learn more about how a premium funding solution works, read here.