Potential Covid-19 Resurgence A Concern For SMEs Heading Into Holiday Period
With recent events highlighting the ongoing threat posed by COVID-19 in the community, new insights reveal that a significant majority of New Zealand SMEs are concerned about the impact a potential resurgence of the virus could have on their business over the holiday trading period.
Following a survey of just over 500 SME owners and decision makers nationwide, MYOB’s Holiday Trading Snapshot found that 82% are concerned about a resurgence of COVID-19, with almost a quarter (24%) saying they’re very concerned and more than one-in-10, extremely concerned.
Thinking about the likely effects of another community outbreak scenario and the many countries in various forms of lockdown, as demand for Christmas gifts increase, so too are SMEs’ worries about stock levels.
In fact, 70% of our local SMEs are concerned about the impact COVID-19 could have on their supply chain, with 20% of this group saying they’re very concerned.
MYOB New Zealand Country Manager, Ingrid Cronin-Knight, explains that while businesses have been doing their best to navigate the disruption from COVID-19 for months now, with the busiest time of the year approaching, business owners will be hoping for a stable trading environment.
“We know that many New Zealand SMEs rely on the summer holiday trading period to generate what can add up to be a significant portion of their annual revenue, so it’s understandable that they are worried about a resurgence of COVID-19 – particularly those operating in the retail sector.
“In addition to heightened concern more generally around the potential impact of another COVID-19 outbreak in the community, more than 80% of survey respondents in the retail sector are naturally quite concerned about the impact to their supply chain over the holiday break.
“While New Zealand has mitigated the risk of community spread quite well to date, for all consumer-facing businesses, it’s careful preparation and planning that will be the key to a successful Christmas trading period this year.”
Preparing for uncertain times
2020 has been a year of change for business, and planning for survival and success over the holiday period in the time of COVID-19 has been a key part of SMEs’ Christmas trading preparations.
According to MYOB’s Holiday Trading insights, 60% of SMEs have proactively made changes to their operations in the lead up to the Christmas and New Year holiday period, with 22% stating that they’ve made ‘a lot of changes’ to their business, while more than one-in-10 say they have had to completely re-adapt or re-position their business.
With concerns around supply chain top-of-mind, nearly a third (32%) of SME owners and decision makers who have made changes to their business in preparation for the holiday period have ordered stock earlier than usual, and more than a quarter (28%) have limited the volume of products ordered.
“An effective, strong supply chain can make a significant difference to the performance of a small business and with our insights showing that many New Zealand consumers will be both shopping earlier and shopping local this Christmas*, there’s good reason for SMEs to feel positive about their decisions around these changes,” explains Ingrid.
As well as taking action to mitigate potential supply chain issues, MYOB’s research shows that there are a range of steps SMEs are taking to shore up a strong holiday trading period over the coming months.
Of those respondents who have made changes to their business ahead of the upcoming Christmas/New Year period, nearly a third (32%) have developed business plans to prepare for the movement of COVID-19 alert levels, almost a quarter (24%) have planned to extend business hours, and 21% have abstained from taking on new staff. The same proportion (21%) also said they have moved to or started e-commerce sales.
“Whether it’s embracing new technology channels or adapting time spent on the shop floor, it’s clear that New Zealand’s SMEs are taking care to apply what they’ve learned from their experiences over the past several months, but with a new angle as they shape plans specifically with the holiday season in mind.
“With more than half of those making changes to their business admitting that this is the first time they’ve taken these steps over the Christmas and New Year period, these insights really reiterate the impact COVID-19 has had on how SME owners and decision makers are managing their operations.”
Interestingly, while the majority of SMEs are making changes to their business, only 22% of this group have sought business advice around their Christmas and New Year operations.
Cashflow management and payment times
In addition to altering their business processes, MYOB’s Holiday Trading Snapshot shows that the majority of SMEs are also taking proactive steps to manage their cashflow this Christmas – 62% of those surveyed have plans in place to help manage cashflow in instances of slow payments.
With plenty of measures in place to protect and prepare their business for the holiday season, many SMEs appear to be feeling optimistic about cashflow and invoice payment times after the holiday period.
More than half (58%) of New Zealand’s SMEs expect to pay their suppliers on time after the Christmas break, but 27% admit they are expecting to be at least a few days late with their payments.
When asked the same question around the timeframe of when they expected to be paid by their customers, SMEs were slightly less confident. While just over half (52%) expect their customers to pay on time, more than a third of SMEs (36%) are expecting to be paid late by customers. In fact, one-in-10 (12%) expect to be paid a few weeks late.
“Having plans in place to manage cashflow – especially if slow payments are expected – lets the business owner prepare for potential impacts on revenue and most importantly, reduces the stress on the business,” says Ingrid.
“While it’s worrying that some SMEs are expecting to be paid a number of weeks late or admitting they could be late to pay their own suppliers, we’ve seen through this research that the majority are taking measures that will in turn help to improve cashflow levels – hopefully mitigating these potential outcomes. We should commend these efforts, but likewise reiterate that for any business unsure about cashflow, it’s never too late to speak to a business advisor or accountant if invoice payment times are a concern.”