According to new data from Kabbage Inc., a financial services platform with an international network of global-bank partnerships including ING and Santander, 70 percent of smaller-size retailers and nearly 50 percent of restaurants see the fourth quarter as a profit-reaping one.
Kabbage Inc., a global company headquartered in Atlanta that has been servicing small businesses through funding, technology and data-driven insights, reveals in its latest report that the last three months of the calendar year cause the greatest fluctuations in cash for small businesses.
Garnering results from 300 small businesses, including both online and brick-and-mortar retailers, “one-third said the fourth quarter is the most profitable time of the year for their business.”
More specifically, the study indicated a range in both cost constraints as well as profitability during the fourth quarter. While 74 percent of online retailers and 71 percent brick-and-mortar retailers agree the fourth quarter is their “most profitable time of the year,” the holiday season garners a closer look at the small business cash flow behind the inventory upswings and even employee gift exchanges.
Three reasons for heightened costs during this period are attributed to the purchase of more inventory, higher spending on employee gifting and dinner parties, as well as increased spend on advertising culminating in 42 percent of small businesses reporting costs rising to as high as 25 percent.
Breaking down the year-end spending within the retailing sector, online retailers reported 65 percent cost increases and brick-and-mortar with 60 percent cost increases during the fourth quarter.
Stressing the importance of financial preparedness for small business retailers, chief financial officer, Scott Rosenberg said: “As a former retail industry executive, I’ve seen first-hand how seasonality can turn a good year into a great year and how critical it is to be financially prepared to manage climbing costs to reach higher profits.”
Cash flow planning is increasingly vital for small businesses to reap profits during the fourth quarter, and this skill may be the gift that keeps on giving throughout the year.