5 Steps to Increase Your Cash Flow at Christmas
The month of December is the most pivotal month of the year for many companies. With many companies closing their doors between Christmas and New Year’s Day, year-end payments are often not processed until mid to late January. This can create a major strain on businesses struggling to maintain sufficient cash flow to cover expenses that must be paid by the end of the fiscal year. Below is a look at the challenges facing businesses in December and five steps to help increase your cash flow at Christmas.
The Importance of Healthy Cash Flow During the Christmas Period
December is full of extra expenses that companies do not have to face during the other months of the year. In addition to standard payroll, businesses face a host of other expenses that can strain a company’s finances. Below are three key reasons why companies must ensure that they have a healthy cash flow during the Christmas period:
- Many companies pay annual employee bonuses in December
- Businesses often have outstanding bills of their own that must be paid
- Incoming revenue streams are reduced due to company closures around Christmas time
Steps to Optimizing Your Cash Flow at Christmas
Optimising your cash flow is a process that cannot be accomplished in one day. You need an early start and a well-orchestrated plan of attack. Below are five steps to help your business successfully collect payments prior to the Christmas period.
1. Begin to follow up on outstanding receivables as early as possible
Do not wait until the week before Christmas to swing into action, or your requests for overdue payments may not receive a response. By mid-December, many people have begun their holiday vacations and do not resume business until after the start of the new year. Initiating collection of outstanding payments as soon as possible gives you a jump on other companies collecting from your clients and gives your customers plenty of time to make payment arrangements.
2. Proactively target customers with a history of delayed payments
Do not be afraid to be proactive – especially with clients who tend to be late remitting payments. Most businesses have a small handful of customers who are responsible for the majority of their outstanding payments. Failure to collect from these customers prior to Christmas can delay your receipt of payment until the second half of January or later.
3. Offer incentives to customers who pay in advance
Customers with perfect payment records are not the norm, yet are often taken for granted by businesses. Christmas time is the perfect time to show your appreciation to customers who pay upon placement of their order. Extending discounts to customers who remit payment in full when they confirm their orders is beneficial to your company because cash flow increases. This strategy is also advantageous for the customer, who is able to enjoy year-end savings.
4. Send a letter before action by email
Letters Before Action (LBAs) are a cost-effective way to prompt customers to remit payment. LBAs sent by email tend to produce better results than LBAs sent by post because customers receive them faster. Additionally, LBAs sent by email tend to be paid faster compared to those sent by post. Customers are rarely offended by the receipt of an LBA and we have found that roughly 84% of customers pay their debts upon receipt of an LBA.
5. Seek the guidance of an experienced debt recovery specialist
The best way to approach debt collection is to enlist the support of a specialist debt recovery firm. A trusted firm will help you manage your receivables from start to finish, helping you to eliminate cash flow concerns.
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