With the festive period being the most important time of year for many small businesses – particularly those in the retail sector, there are some fundamental measures firms can take to ensure that they maintain a healthy cash flow.
Although the most recent Experian late payment report shows that the time it takes for firms to pay invoices has fallen compared to the same time in 2012, the average time is still almost 25 days beyond the agreed payment date. Although larger firms may be able to wait before being paid, many small businesses would face serious financial problems if just a handful of invoices became late.
With this in mind, Bibby Financial Services, has provided some useful tips for business owners on how to remain profitable during the Christmas season – focusing particularly on the need to maintain financial liquidity, and avoid taking on excess stock which will be difficult to shift in the New Year.
- Plan your forward cashflow management to take into account the surge, and subsequent dip in sales many businesses will expect over the coming weeks, and take into account the time some clients may take to settle invoices in January.
- Make sure you issue customer invoices promptly, and accurately, in advance of the Christmas break.
- Keep on top of your invoices, and be aware when an invoice becomes overdue. Don’t be afraid to chase customers for payment, and be persistent.
- Before you enter into a business relationship with suppliers and customers, make sure that you print your payment terms clearly on all relevant paperwork.
- When you do any new business, make sure you make a note of a specific person you can contact in the accounts department, and take full contact details.
- If you have the resources, create a dedicated team to look after invoicing and credit control issues.
Edward Winterton, Bibby’s commercial director, commented: “The run up to Christmas is always a time when owners and managers feel the most pressure in all aspects of their operations. For many businesses, there will be a concerted effort to bring in as much sales revenue as possible before their books close at the end of December.
You can read dozens of cashflow guides, including how to deal with late paying customers here.