The Festive Season tends to put a lot of pressure on a business’s finances, and it’s vital to protect your cash flow over the Christmas period.
There are bound to be delayed payments, increased expenses, and increased financial risks, making protection of your cash flow your priority in this busy season. In this post, we’ll talk about how you can minimise your risks and maintain financial stability through effective strategies during the upcoming holiday season.
Why Do You Need to Protect Your Cash Flow Over Christmas?
Failing to protect your cash flow over the Christmas period will, more than likely, hamstring your business for many months to come. Most businesses don’t understand that overdue accounts cost their business 2.5% per month. This means that for every $ 100,000 that a business has outstanding, it costs that business $2 500 / Month.
Worst still, if those accounts remain outstanding for 60 or 90 days over the Christmas period, it’s costing those businesses 5 to 7.5%. If those accounts remain outstanding they can really eat into the profit of a business. In fact, as a result in the slowdown of cash flow, The Australian Taxation Office (ATO) winds up more businesses during the Christmas period, than any other time of year. This coupled with the recent statistic show an increase of 162 percent in company collapses over the last twelve months. All this points to the fact that businesses should be taking debtor management seriously during this busy season.
7 Tips to Protect your Cash Flow over Christmas
1. Collect Outstanding Accounts First
The very first step in protecting your cash flow over the Christmas period, is to ensure all your debtor payments are made on time. Review your accounts receivable and proactively follow up on overdue payments. You might find using a professional debt collection agency simplifies matters further, increasing your chances of recovering most of what you are owed, freeing up your time for other critical business matters.
2. Strengthen Credit Management Policies
Tighten your credit terms to avoid future payment delays. Assess the creditworthiness of your clients before extending them payment plans, and ensure clear and enforceable policies. For example, requiring an upfront deposit or simply reducing your payment terms can minimise your risks. You can refine your strategy better through the use of a credit management company. Collection Consultancy Australia offer a free review of your existing client documentation and will outline potential cash flow saving strategies.
3. Clear Communication to Consumers
Effective communication is key to collecting outstanding accounts. Advise the client concerning the due date and then remind him or her closer to those due dates. Giving friendly but firm reminders will help avoid most instances of delayed payment which would otherwise create disruption in cash flow over the holidays.
4. Use Debt Recovery Services
If a client delays payment, and sending reminders has had no effect, then considering a debt collection service may be worthwhile. Professional collection services will help resolve disputes and recover funds more efficiently. It also helps prevent debts from becoming older and harder to collect, which may also disrupt your cash flow.
5. Record Your Spending Very Carefully
Christmas, in general, tends to bring in more costs, including the cost of staffing and inventory. Make a precise budget for the season, and monitor your spending, thereby preventing undue pressures on your pocket. It is worth noting that proper cost control is essential to protect your cash flow.
6. Establish a Cash Reserve
Build up some cash flow reserve before Christmas to protect against uncertain or delayed expenses. An emergency fund will prevent a series of short-term cash flow shortages from snowballing into long-term financial problems. Even if it is very small, an emergency fund can really make a big difference.
7. Review your end-to-end Process
Have your terms and conditions reviewed to make sure that they are legally binding, compliant, and protecting your business. There is no point engaging with clients if they are not signing and committing to your terms and conditions that protects all parties. If your client is unwilling to sign your terms and conditions, it is a strong indicator that they are probably not going to meet their financial obligations. The day of the “old school” handshake are gone. With liquidations going through the roof, not knowing who you are dealing with, or just the disputes that come up when dealing with clients, is asking for trouble. Give yourself the best chance by having terms and conditions of your business tabled, signed and protecting your cash flow.
Final Words
While the holiday season may present great opportunities for businesses. It’s important to protect your cash flow over Christmas. Through effective credit management, prompt account collection, and professional debt recovery services, you can ensure the overall safety of your finances heading into the New Year. Don’t allow unpaid debts to rock your business. Implement the strategies above today to stay financially resilient.