The Christmas season and its impact on the manufacturing, construction and retail industries

10 December 2015

Christmas is marketed as a season of goodwill to all, however most businesses are affected by the period in one way or another. In this edition of Inside Edge, we have focused on two main industries and the effect of the Christmas season on businesses in those industries:

Manufacturing, construction and related entities

The impact of Christmas for businesses in these industries usually hits in late December each year when businesses close for a period. The business won’t generate any income whilst closed, but the workers need to be paid their holiday pay and suppliers still need to be paid for purchases from previous months. If businesses haven’t performed as expected during the year, they can face a cash flow shortage when it comes time to pay these liabilities. Under-performing businesses may become insolvent as a result of these strains on cash flow.

Retail

Many retailers can benefit greatly from the Christmas period with increases in turnover. With advertising starting months in advance each year, customers are inundated with messages of festive cheer well in advance of the actual date. The retail industry is forecasting a 3.6% increase in turnover this year with customers tipped to spend $46.7 billion in the period 15 November 2015 to 24 December 2015. It doesn’t just end with Christmas however, with the post-Christmas sales extending well into January each year. The problem quite a few retailers face each year however is what happens after that. Many retailers face financial difficulties in the early part of each calendar year when it comes to paying for supplies purchased in October and November, after they realise that their turnover didn’t meet expectations. A further impact on the traditional “bricks and mortar” retailers is the ever growing popularity of online shopping, placing further strain on the turnover of those businesses with that model.

Owners facing dilemmas of this nature should seek advice early, before they put their business and potentially personal assets at risk. BRI Ferrier are available to assist you or your clients in assessing their position and providing honest, straightforward solutions.

Owners should also be aware of the risk of attracting personal liability for their company’s debts if superannuation isn’t paid on time or PAYG withheld isn’t report by the due date. Read our Inside Edge issue on ATO Directors’ Penalty Notices: Help directors avoid personal liability which covered these topics.