Christmas is almost upon us, but for many small businesses it’s hard to drum up any festive cheer when it's more difficult than ever to get invoices paid.
According to the Federation of Small Business (FSB), 30% of invoice payments to small businesses are made late. At this time of year, late payment is even more likely; in a LinkedIn survey conducted by Penny, 67% of business owners said that they find it harder to get invoices paid in December than at other times of year.
“Getting invoices paid in December and January can be a real challenge for businesses - it’s a trend in most industries I’ve worked in. The reasons broadly fall into two categories - financial reasons and the general Christmas shut down that happens across most accounts departments over the festive period. This comes at a time when businesses really need good cash flow to meet their Christmas payrolls and get their own suppliers paid.”
How to get your invoices paid before Christmas
Here are a few ways you can buck the trend and ensure you get payment in before Christmas:
Send invoices early
For the rest of the year, accounts payable departments generally set up monthly payments runs in the last few days of the month, so you receive payment in the first week of the new month.
However, in December, this processing date tends to get moved forward to enable accounts teams to get everything completed before Christmas.
To increase the chances of getting paid, get your invoices in early, ideally within the first couple of weeks of December. Invoices that arrive in the last two weeks of December are more likely to miss the cut off.
Identify debtors with December year-ends
It can help to know which of your customers are most likely to put off paying your invoices until the New Year, so you can prioritise chasing efforts and reinforce your payment terms.
A good place to start is with customers that have 31st December year-ends. This is because some businesses can hold off paying outstanding debts until after their year-end date, in order to make their accounts look in better shape. You can find out companies’ year-end dates on Companies House
At a glance, here’s how to increase your chances of getting on that all-important December pay run.
Send your invoices as early as possible
Identify who late payers are likely to be
Include a full statement of all outstanding invoices
Make your payment terms and due dates absolutely clear
Guarantee payment before Christmas
At such a hectic time of year, both professionally and personally, cash flow problems are the last thing you need.
As we’ve said, there are a number of ways you can help make sure late and unpaid invoices don’t become an issue for your business this Christmas. However this does mean ramping up your chasing and admin activity - and your stress levels - all with no guarantee of payment before the New Year.
Matthew Cusack, Director of Arrow Consultancy Limited, suggests invoice finance may be a solution for businesses:
“In our experience, obtaining payment for invoices during December is notoriously difficult for a myriad of reasons: key personnel finishing early for Christmas and businesses looking to preserve cash flow for year-end etc. Utilising invoice finance during this period can provide a business with the lifeblood it needs to manage its way through Christmas and have stability to focus on its core offering going into the New Year”.
On-demand invoice finance with Penny allows you to advance your invoices and get money into your business instantly. To find out if we can help you accelerate your cash flow, just get in touch with our team.