The new year can often kick off with a cash flow hangover after the holidays, with small and medium businesses getting off to a shaky start. The final weeks of the year typically continue to see a flurry of expenses, although employees are often taking time off and business activities are generally slowing down.
The weeks before and after the holidays are prime times for late payments, due to either over-stretched budgets or businesses closing for the holiday stretch. Rent bills can come due for SMEs that pay quarterly, with the due date perfectly coinciding with Christmas Day. Even with the post-holiday cash crunches, SMEs can take action to ensure a full recovery is part of the game plan for the months ahead.
Track your habitual late payers – and how much they owe
Making a list of slow payers can give you a better idea of what to expect over the next few months. Identifying the problem is the initial step in developing a solution.
Speak with clients
Picking up the phone can go a long way toward pushing your payments to the top of a client’s priority list. Reach out to clients with large amounts outstanding, or those with whom you have a strong relationship, and agree upon a payment date.
Propose incentives for early payments
Discounts or other perks can help prompt clients to pay early. The strategy helps them feel valued while potentially helping you maintain a steady cash flow during the slower months.
Consider outside funding
A finance facility can be useful to bridge the cash flow gap that often comes early in the year. Institutions can offer programs like revolving credit, lines of credit or deferred payments plans that can free up your funds and provide an added layer of financial confidence. Short-term arrangements can be made rather quickly to suit your business’s precise needs.
Establish a buffer over the course of the year
Small steps you can start taking at the onset of the new year can help you manage next year’s holiday crunch. Plan ahead wherever possible, making small yet vital changes that can help ensure you have a cash reserve built up by next December. Having backup funds will let you enter the new year breathing a bit easier, knowing you have the means to get through the slower months ahead.