At Christmas, managing cash flow is something businesses need to take into serious consideration. Things like early payroll and bonuses as well as staff holidays and long payment terms brings extra added pressure during the festive season, for which SMEs are often unprepared. According to Santander corporate and commercial, almost 27% are ‘quite’ concerned when it comes to the next 12 months in relation to their cash flow and a significant one in six are reported to be ‘very’ concerned.
Prepare for the Worst
A handy tip for businesses that are anticipating late payments, or even slow sales over the Christmas period, is to organise time accordingly. Businesses should predict a worst-case scenario for their cash flow and then prepare for it to happen – whether that’s unexpected bills, absent staff, delayed income due to Bank Holidays; businesses that make a worst-case estimate of how much money they can expect to flow in and out of the company during the month of December, can prepare for any sudden bumps in the road. Forget Blue Monday, Businesses that are in denial that any cash flow disruption will occur during the month of Christmas are likely setting themselves up for an entire Blue January.
Be Flexible with your Funding
Whilst Christmas is the season to be jolly, ‘tis the season for late payments’ is also just as fitting as the time of year sees directors and other staff responsible for approving supplier payments, taking holiday and transactions getting in the very least delayed if not forgotten or lost. Another reason why SME’s need to ensure they have access to a flexible amount of funding during the month of December.
Offer Early Payment Incentives
Although businesses will benefit from preparing for a drop in income over Christmas, they can also take preventative measures to ensure that things stay as close to normal as possible. SME’s can consider awarding prompt payment discounts to customers that pay their invoices early. This will incentivise clients to pay in advance, meaning less disruption to cashflow or even a possible increase altogether. Not only this, but fostering customer goodwill is also good for relationships and general loyalty for the new year ahead.
Begin the Debt Collection Process Immediately
One mistake that businesses can make is getting caught up in the end of year wind down and failing to chase payments as soon as they become overdue. Whilst companies may be busy wrapping a lot of things up at the end of the year, tax, VAT and rent still need to be paid, so small nudges to late payments are always worthwhile. This then leaves enough time for further action to be taken later in the month, should it be required. A good place to start is to target those customers with a history of late payments; there may be a few outstanding invoices in their name, which, when payment is received, will be a massive boost to cash flow.
Take Action if Needed
If business customers are making a habit of late payments at the expense of a business, using bank holidays and the Christmas period as an excuse to avoid paying debts, unfortunately it might be time to take action. Using a unique approach to debt recovery, Spratt Endicott acts for a wide variety of businesses, ranked in Tier 1 in the legal 500 UK 2018-19 for the South East. Spratt Endicott offers a pre-legal service that works on a no win no fee basis and can recover late payments to ensure a well-managed cash flow for businesses over the Christmas period, to secure solid financial foundations on which businesses can start the new year.