THE “Ber” months phenomenon doesn’t just concern Filipinos in terms of the harried shopping, reunions and bumper-to-bumper traffic. It has a ripple effect on them, especially business owners.
Last Christmas, inflation in the preceding quarter did not stop Filipinos from having a merry Christmas filled with lots of food and booze. While 43 percent of Filipinos were said to do their holiday shopping only in December, retail stores weren’t the only crowded places that time; KTV bars and restaurants too. Whatever the economic situation, Filipinos always find a way to celebrate the season with family and friends.
As Christmas approaches, and after the government reported that the country’s gross domestic product grew to 6.2 percent in the third quarter of 2019, we can expect Filipinos to make good use of their 13th-month pay. Companies driving this growth would also be expected to have a bigger budget for more lavish parties or give better corporate items to their partners and employees.
But no matter how prepared we think we all are for the Ber months, small to medium enterprise (SME) owners can never be 100-percent sure. Filipino consumers are also known to order at the last minute, and this year won’t be an exception.
The backlog problem
Increasing orders typically force business owners to use all their working capital to meet demand “for now” and hope to get repaid by clients for pending invoices soon. Receiving payment ahead of or on time, however, is rare. This is just one cause of backlog, and there are much more reasons for business owners to fear the consequences of a tight cash flow.
For printing company A, this year’s challenge is realizing that most of its production staff are taking their leaves at the same time. Although it asked some to use their calendared leaves on another date, others refused as they already had flights booked and their leaves had been approved. What would the company do with the influx of orders coming in? It might not be able to fulfill its commitments. Even worse, with employees gone and lost opportunities, the firm still needs to have enough funds to pay their salaries and bonuses amid a negative cash flow spike.
For shipping company B, it may have projected that high-demand for, say, online shopping, and are well-stocked and staffed for the task, but a simple fender bender on EDSA could potentially affect their delivery and delay shipping orders, to the dismay of its loyal customers.
For construction company C, they would simply have to turn down proposals if they don’t have any more cash to spend for materials and daily wages for laborers.
Turning a challenge into an opportunity
The Christmas season is historically one of the best seasons for businesses to generate higher sales. We’re not the only ones who get in a Ber frenzy, and this is an opportune time for SMEs. Business owners simply have to prepare for the stress and possible operational disruptions that they would experience.
First of all, a seasoned entrepreneur would say is always have a plan B and C. Knowing your options and alternate solutions for every part of your supply chain is key, not just during the Ber months, but for every day.
Tighten controls by forecasting. Corporations aren’t the only ones expected to do yearly planning. SMEs must also factor in costs, like bonuses and parties, as well as holiday public advisories that would impact the business. Also take into account the holiday schedule of your suppliers, which could impact your production.
Be prudent with your spending. You don’t have to buy everything you may think you need during the Christmas season. Prioritize expenditures that would positively impact your cash flow first.
If you can, try to find a way to get repaid on time. Make it your collections team’s KPI to find a creative way to get your clients to pay on time other than nagging them by phone and email. This tactic almost never works.
Short-term loans are a business owners’ best bet when it comes to end-of-year cash flow problems. The quickest and most typical kind would be getting invoice financing to access the cash owed you at the moment. Another would be purchase order financing, which temporarily funds your clients’ increased orders for the season. Many business owners have done this and continue to get financed for their invoices and purchase orders throughout the year, as this type of loan doesn’t require collateral.
If you’re experiencing the same backlog in your business, you may consider help from financial technology (fintech) companies like First Circle. First Circle provides fast, convenient and reliable financing. We are trusted by the Philippine government as a finance partner of the Department of Trade and Industry. First Circle is one of the registered fintech companies licensed by the Securities and Exchange Commission.
To learn more about First Circle’s financial solutions, visit www.firstcircle.ph.
Lee-Anne Tobias is the senior communications associate for First Circle Growth Finance Corp. She has 10 years of experience in digital media, business communications, corporate social responsibility and qualitative research in the energy and market research industries. Email her at [email protected]