Christmas can be a tough time for consumers when it comes to cash flow, but it can be equally difficult for businesses.
As company’s shut down for the holiday period, invoices can get left unpaid, leaving companies chasing debt in the new year.
As reported recently in SmartCompany, some businesses are taking nearly two months to pay their debts, putting SMEs into a troublesome cycle.
Bibby Financial managing director Australia and New Zealand Mark Cleaver said with so many business people going on holidays, it is important to put systems in place to protect cash flow over Christmas and New Year.
Here are his nine expert tips to get through this period with money still in the bank.
As you complete work, you’re entitled to charge clients, so invoice clients when work is done rather than wait until the end of the month to send invoice: Time is money, so act now and get paid sooner. You should also make your payment terms clear. Payment terms are usually set at 30 days; however, it’s perfectly legitimate to set your own terms at 14 days. You’ve done the work or delivered the goods, so you are entitled to payment.
Deal with late payers as soon as you become aware that an invoice is overdue. Any accounts receivables system should be structured so that late payers are identified as soon as possible. Remember, a sale isn’t a sale until the cash is in your bank account. So if there is a problem, pick up the phone and demand payment. An invoice is money due to you, not a donation.
Investing in software can help you streamline your invoicing and receivables management as well as protect your cash flows. There are several excellent solutions available on the market that can automate the invoicing and receivables management functions, so investigate your options. Automation means you can redirect your staff to other functions within your business, such as sales or operations, helping to make you more profitable.
Over the holiday period, you might consider rewarding early or consistent payers with a small discount on their bill if it won’t harm your business. This is a great way to say thanks and show your appreciation to your loyal customers – and it might well bring in cash sooner than you expect.
If you’re hoarding stock that isn’t likely to sell over Christmas or the New Year and it’s got a use-by date, consider selling it at a discounted price to get it out. The November Westpac-Melbourne Institute Consumer Sentiment reveals consumers are planning to restrain their Christmas spending this year, with 35% of Australians recently saying they intend to spend less than last year, while 51% are planning to spend the same. This is sobering data so the time might be right for a sale.
There’s no point keeping your business open and incurring costs if you aren’t busy over the Christmas period. Either maintaining a skeleton staff or shutting down over the holiday period can save running costs, as well as keep staff annual leave entitlements in check.
Debtor finance can help companies alleviate difficulties with cash flow by quickly converting unpaid invoices into cash. Typically, a debtor finance company advances you up to 85% of what you’re owed from customers within 24 hours of request. The remaining 15% balance, less a small fee, is paid to you when your customers pay their invoices. This allows SMEs to leverage one of the biggest assets on their balance sheet, accounts receivables, to create immediate cash flows and avoid the Christmas squeeze.
Consider the Christmas period as an opportunity to review your business and marketing strategy. Consider dabbling in social media next year to increase engagement with your target audiences or listen to the conversations they are having about your business or sector on Twitter, Facebook or LinkedIn. Bibby’s recent Barometer, conducted in July, found that 75% of small businesses are using social media tools in their business operations.
Running a business can lead you through countless hurdles and challenges. Ensure you and your staff schedule in time to relax, have fun and partake in the festivities. Why not enjoy a friendly game of backyard cricket.
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Melinda is a business writer and editor and helps companies to bring their brand stories to life through her small business, Oliver Content. Melinda was previously the content manager for KPMG Australia, an editor of SmartCompany, and spent many years as a journalist.
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