Keep your supply in order to prosper this festive season  

For business owners, the festive period represents more than spending well-earned time with family and friends

Keep your supply in order to prosper this festive season 

A third of small retailers make 20% of their annual revenue between Black Friday and Christmas Day, making the festive season a crucial sales period. It’s one of the few opportunities to negate the trend of restricted consumer purchasing. 

Setting aside some of the challenges like inflation and economic turbulence, sometimes a small business is only as good as its supply chain. After all, this all-important shopping season marks such a sharp uptick in sales for many small brands that it can be difficult to scale to meet this demand. Likewise, the impact of geopolitical shocks such as the Ukraine war and the lingering impact of Brexit has driven many retailers to switch to local providers as a long term strategy.  

These changes have not been easy, with many owners already increasing prices due to inflation driving up costs for goods and materials, while simultaneously managing higher energy bills and staff shortages. It can be difficult to find the time to identify the right suppliers to work with, a task which comes with a unique set of challenges.  

To help you overcome these, and drive growth during one of the busiest times of the year, here are a some tips to keep your supply chain flowing smoothly. 

Understand what makes a good supplier 

Switching to local suppliers can help protect the supply chain from global economic shocks, making stock provision more reliable in the long run. But this is not risk-free. It is important to look for suppliers that have a large network of delivery partners, so that there are fall-back options if one or more links in the chain are disrupted. For example, one partner might be better suited for local deliveries, while others are better for those further afield. This can improve flexibility while helping you reduce delays and stay on top of shifting customer demands, because local suppliers often respond quicker to requests.  

Building good relationships with these providers is vital too. Identifying which are the most crucial for your operations and taking the time to speak with them and understand what they need to be successful can help your operation in the long term. For instance, if you know they need at least a week to process your order, you can work with your customers to ensure orders are placed in time for any deadlines they might have. 

It pays to maintain trust 

Speaking of good relationships – trust in the supply chain can fall apart if the various components do not pay each other on time. Unfortunately, this is not always the case. Our latest Xero Small Business Index data found that on average, small businesses in the UK were paid 7.7 days late in September – the highest level in three years. 

Late payments cause significant cash flow crunches for small businesses in the UK; our Cash Flow Crunch report found that 23% of UK SMEs face negative cashflow for 6 months of the year. This creates significant challenges for business owners with limited access to credit, when it comes to paying suppliers and staff. It also means they can invest in stock to maximise on the festive period. 

While there is work the government can do to improve this situation, such as enforcing harsher punishments for large firms that regularly pay late, there are steps owners can take. For example, creating budgets can help you look ahead and anticipate any cash flow crunches you might face. Likewise, giving customers the option to place orders further in advance can help manage demand for products and give your firm a cash flow boost to pay suppliers, instead of shouldering the initial cost yourself. 

Preparing for the rush 

Making the most of the festive period can be make or break for some small businesses. With Christmas spending hitting £84.9bn in the UK in 2022, missing out on a slice of the action could have big consequences. 

Holiday-proofing your business starts with preparing for the busy season early. For example, communicating with customers and suppliers about when cut-off dates for orders are if they want products to arrive on time. This will give you enough time to manage any delays that might occur in your supply chain, and ensure customers avoid being disappointed.  

Similarly, automating processes such as online orders can help you focus on bigger business issues, instead of becoming snowed under with the volume of requests from customers.  

Although the festive sales period can be daunting for business owners, it’s also an exciting opportunity. With a bit of planning and good visibility of current and future cash flow, you can mitigate the impact of supply chain disruption and late payments, putting your small business in the best position to finish the year strongly and capitalise on increased consumer spending. 

Alex von Schirmeister
Alex von Schirmeister

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