The festive season can boost sales for retailers and small businesses, but preparing for higher demand also means managing inventory purchases, supplier payments, logistics and other operating expenses.
Since these costs often arise before sales generate cash, businesses need to plan working capital around their cash-flow cycles rather than expected sales alone.
Estimate the funding gap
Businesses should budget for inventory, packaging, transportation, staffing and delivery costs, while accounting for existing liabilities and the possibility of slower sales.
Pallavi Shrivastava, Co-founder of MSME fintech company Progcap, said festive financing should be aligned with the time between purchasing inventory, selling it and receiving payments. The speed of disbursal and tenure of credit are equally important.
Match borrowing to the repayment cycle
Businesses should assess how much additional credit they need and compare interest rates, processing fees and repayment terms before borrowing.
Siddharth Mehta, Co-founder and COO of Kiwi, said smaller expenses such as packaging, transportation, displays and supplies can add up during the festive season.
Credit lines linked to the Unified Payments Interface (UPI) may help eligible users manage such expenses, subject to applicable costs and repayment conditions.
Account for payment settlements
Sales do not always translate into immediately available funds.
Harjot Singh, Senior Director – Product Management at Cashfree Payments, said cash-flow pressures intensify during the festive season as businesses manage vendor payments and higher transaction volumes. Merchants should account for settlement timelines and maintain sufficient liquidity to meet near-term obligations.
Factor in returns and discounts
Higher order volumes can also bring cancellations, failed deliveries, reverse-logistics costs and restocking expenses. Businesses should assess the impact of cash-on-delivery orders, payment processing charges, bank offers and no-cost EMI promotions on margins and cash receipts.
Maintain a contingency buffer
Festive sales may fall short of projections, leaving money tied up in unsold inventory. Businesses should retain funds for essential expenses and debt repayments, review cash flows regularly and avoid borrowing more than they can repay from expected business receipts.
Ultimately, festive financing should bridge a temporary working-capital gap, not create a longer-term repayment burden. The amount, timing and tenure of credit should match the business’s operating cycle and its ability to generate cash.