Chasing unpaid invoices is never an enjoyable prospect for a business but it can be even more painstaking around the Christmas period. As the festive season is approaching and the year 2017 is coming to an end, many businesses begin to unwind. However, for credit control and finance departments it is arguably the most crucial time of the year.
For some businesses Christmas is an exciting but manic, plentiful time of year – for others, they use it as a quieter period to catch up on the rest of the year. Either way, Christmas means shut down for most companies, staff who are usually responsible for approving payments already have their holiday plans in place and chances are those invoices you sent will collect dust at their desk and they will not be paid until the new year.
This can have a huge impact on cash flow but taking the right measures can prevent a cash flow shortage.
Late Payments Cause Cash Flow Issues
The problem of late payments in the UK is not just restricted to the Christmas season. The scale at which late payments affect SMEs is not just under-reported but also under-estimated.
New research from Nucleus Commercial Finance reveals that on average invoices are not paid until 74 days after being issued, despite typical 30-day payment terms.
These results highlight one of the key reasons why, so many businesses struggle with cash flow. Of the 96 industry sectors analysed, just one, employment agencies, paid their invoices within 30 days on average.
Only 12 sectors managed to pay invoices in less than 45 days including Education and Construction, while the rest took much longer at 74 days on average meaning that they would not receive payment until early February.
Chirag Shah, CEO of Nucleus Commercial Finance says, “Most businesses rely on having healthy cash flow to grow, but many businesses rely on it to just keep operations running day to day. We want to highlight the challenges business owners face, and make people aware that this is a cross-industry issue. We all need to take responsibility for payment terms to create a thriving eco-system of businesses.”
The Federation of Small Businesses (FSB) conducted a survey to understand how deep this problem goes. In this survey they identified that close to 10% of SMEs receive more than 80% of their payments behind schedule. Such poor payment practices can severely impact the functioning of businesses.
When we consider the impact of long or late payments on our economy as a whole it only gets worse. The industries that are worst hit by late payments include; the construction industry, high street retailers, super markets and online retailers.
So, how can we combat the implications of unpaid invoices this Christmas?
Here is our 3 step guide;
1. Find out whether your customers will be closing for all or some part of the festive season. If your standard contact will be on holiday be sure to find out who will be looking after their work whilst they are away and get their contact details.
2. Be extra organised and efficient – ringing people in advance to find out when to expect payment and planning accordingly.
3. Make provisions well in advance and seek finance to help navigate the uncertainty of this time of year. Cash Flow Finance is a product specifically designed for this.
What is Cash Flow Finance?
Cash Flow Finance is a simple unsecured business loan which can be availed by businesses to resolve any financial issues they might be facing. This form of alternative finance can be used for any purpose as long as it is related to business and these can include but are not limited to;
● Working Capital
● Debt Consolidation
● Tax Bills/VAT
● Asset Acquisition
● Management Buy-outs
● Office Renovations
Benefits of using Cash Flow Finance
The boundary separating successful businesses from the unsuccessful ones is a thin line and it is cash flow that determines which side of the boundary a business will belong to. As the Christmas countdown approaches, businesses can no longer afford to sit and patiently wait for their invoices to get paid.
As it is, businesses are often faced with financial challenges in the final quarter of the year. The urgency to complete orders for the Christmas rush, coupled with the extra expenses of Christmas bonuses or temporary staffing costs can put even more pressure on cash flow.
Superior cash flow can facilitate longer-term strategic decisions while also improving a business owner’s ability to make decisions. It brings security and stability to an organisation helping it to achieve growth and economies of scale.
This in turn empowers the organisation to pursue new avenues for expanding their business. The end result is that the company gets into a much better position to take on their competitors and establish dominance.
Benefits to the Economy
The UK economy is hugely dependent on the performance of small and medium sized businesses. Almost 99.3% percent of all businesses fall into this category and they are responsible for at least 47 percent of the turnover of the private sector.
The Bottom Line
Cash flow issues due to unpaid invoices can occur to a business at any time of the year, but they can be particularly crippling around the Christmas period. It is tough for a business to maintain a good cash flow but with the tools like Cash Flow Finance, you can easily walk your business through this crunch time. Whether you are busy or quiet, prepare early and make sure you have measures in place to help you cope with the extra pressures on your business at this time of year.
Speak to our expert funding team our products and services come with guaranteed expertise, honesty andcertainty. If you’d like to find out more, please contact one of our credit specialists on 0207 839 1980 or email firstname.lastname@example.org.