Why do companies need to have liquidity before Christmas?

Thousands of businesses experienced a growth in sales during the Christmas campaign, so they need to have liquidity to meet all orders

Christmas lights are already shining in the streets of many cities, and December begins this weekend, so we can now say that we are on the verge of the Christmas holidays. Beyond its importance on a family and personal level, Christmas plays a fundamental role for thousands of companies that experience increased demand for their products or services. To manage all the orders they receive, they must, in turn, undertake expenses such as the purchase of material, hiring of personnel or acquisition of machinery. What do they need to meet these expenses and investments? To have liquidity.

Any entrepreneur or professional who has started a business knows how important it is to have liquidity so that a company can manage its accounts and plan its finances as efficiently as possible.

Therefore, one of the most essential activities of any business is to make sure that they have financing channels to avoid liquidity problems, especially at a time of vital importance such as Christmas.

In addition to the traditional financing mechanisms associated with banks, today, companies can resort to alternative and complementary financing methods such as crowdfactoring.

Below, we will analyze why companies need liquidity during December to meet their orders and close the year with record sales figures.

Having money to prepare for the holiday campaign and invest in marketing

Having liquidity before Christmas starts is essential both to undertake the necessary investments and expenses to absorb the increase in demand and to invest in attracting customers and getting them to buy a company's products.

When any project is prepared with time, effort, precision and dedication, it is more likely to succeed. The same is true for the Christmas campaign.

Consider a company that manufactures shoes and sells them to different shoe retail chains. Suppose you have forecasts that allow you to see that demand will increase by 50% during December. In that case, you can anticipate this increase by spending wisely and not having to manage purchases and investments against the clock.

Likewise, having liquidity before we get fully into Christmas is essential to be able to make investments in marketing, advertising and commercial activity, from hiring ads on search engines or social networks to increasing the incentives of commercial agents to launching campaigns to attract new customers through email, websites or phone calls.

Today, competition in the marketplace is more challenging than ever. Customers do not fall from the sky, and companies must have strategies to attract and retain them, especially during the Christmas run-up. And this requires to have liquidity to be able to increase marketing spending.

Having liquidity to cope with a higher volume of orders and sales

Let's suppose that the commercial strategy of a business has been a success and has closed numerous contracts with high-value customers.

Take, for example, a bakery that has agreed with several supermarket chains to supply them with panettone and roscon de reyes. These agreements represent an enormous business opportunity that will significantly impact the company's turnover. Still, they also imply considerable expenses: the products to make these preparations, hiring extra staff, paying overtime for workers if necessary, acquiring machinery to speed up the process, assuming the increase in the electricity bill and the cost of gasoline to deliver the sweets…

How can this bakery meet all the expenses we have just detailed? With cash. Therefore, it is essential that companies have liquidity to meet all costs and investments and that the health of their accounts is not affected. Otherwise, they will not be able to manage the big news: the increase in sales successfully. And therefore, they will have to give up some customer orders, a situation in which no company wants to find itself.

Getting to the stroke of midnight with healthy accounts

Although it may seem paradoxical, a significant increase in sales can be detrimental to the health of a company's accounts. That is why it is essential to have liquidity to avoid being in the red, which affects the business results. The possibility of accessing financing in the future even undermines its viability.

Why does this situation occur? Many companies do not get paid instantly for the products they sell, mainly if they supply other businesses, but the invoices they issue to their customers may have a due date of 30, 45, 90 or even 180 days. If we return to the previous example of the bakery, it may be able to pay its flour or egg suppliers after the fact. Still, its workers will want to be paid at the end of the month, and the companies that supply electricity or gasoline will also demand payment for these services.

As a result of this process, we can find companies that have made numerous sales in the heat of Christmas but will not receive the associated revenues until next year. This is why it is so important to have financing channels and continuous and stable liquidity.

Crowdfactoring, an agile financing channel available to companies

Beyond traditional banking institutions' financing lines, essential for the entire productive fabric, companies can resort to nimble and short-term alternative financing channels such as financing invoices on crowdfactoring platforms like Inversa Invoice Market.

What does crowdfactoring consist of? Companies offer to a large market of small investors their invoices issued but not yet collected and due to be paid by other businesses. The savers advance the amount of these invoices in exchange for interest payments. In this way, companies can collect the amount of the invoices before their due date and have liquidity in a simple and agile way. Uploading invoices to crowdfactoring platforms and completing their financing is extremely fast.

This is important, above all, in those cases in which companies need to have liquidity in the concise term due to exceptional circumstances that could not be foreseen, such as business opportunities (a new large client) or investment.

It is also important to note that this type of financing does not consume CIRBE and, therefore, does not affect the company's financing capacity through traditional channels.

Closing the year with an increase in sales

Because of what we have discussed, we can conclude that having liquidity on an ongoing basis is essential for businesses. Outside the business world, it is believed that companies need to finance themselves because they have financial problems, but the daily reality of business shows the opposite. Many companies need to have liquidity to grow, to attract new customers and to be able to respond to orders placed by other companies and citizens.

Just the start of Christmas is the ideal time to highlight the new financing channels that complement the traditional ones and can help companies to have liquidity, to be able to sell more and give a boost to their businesses in the final stretch of the year.

In short, having liquidity to start the Christmas campaign and generate and move forward as many sales as possible can be critical for businesses exploiting many opportunities throughout the holiday season.