The end-of-year holiday season is always crunch time, and this is especially true when it comes to getting paid on time. With many businesses short on staff or even shutting down over Thanksgiving and Christmas, the window of opportunity to get paid is tighter during the holidays than any other time during the year.
According to Fundbox’s own research, 64% of small businesses wait on late payments, which can lead to serious cash flow problems. In fact 48% of Net 30 invoices are paid late. This makes it tough for small businesses to meet payroll, pay rent, buy supplies, and even meet their tax obligations.
That’s something you definitely don’t want hanging over you as you head into January, so take a look at these six tips.
6 Ways to Get Your Customers to Pay On Time—During the Holidays!
1. Factor the Holidays into Your Billing Cycle
With Thanksgiving, Christmas, and New Year falling near the end of the year, many businesses run their accounts payable processes early. That makes it more important than ever that you’re diligent about issuing invoices. Be sure to leave plenty of lead time for those bills to be received, processed, and paid. If a payment is outstanding, be sure to include a statement noting the invoices in question—and follow up. Don’t be afraid to ask when the payment can be expected: before or after the key holidays?
For more advice, read: Is the Way you Invoice Helping (or Hurting) Cash Flow? and 4 Tips for Tweaking your Invoice Terms to Avoid Late Payments.
2. Move to Online Billing and Payments
Whether you send PDF invoices via email or use a cloud-based accounting package, sending invoices online can speed payment processing. Many online tools offer integrated feeds that also let you track conversations with your payer and payment progress.
Consider offering an online payment option too. According to FreshBooks, electronic payments are made eight days faster than traditional payment methods.
3. Form a Relationship with the One Who Cuts Your Check
Knowing the name and email address of the person who cuts your checks is a huge asset. Most B2B relationships are with sales, marketing, or other non-accounting personnel, but if you can get to know accounts payable staff, you’re in a stronger position to get answers about where your payment is in the processing cycle—and chase them directly if there are any delays.
4. Focus on Customers Who Close their Books on December 31st
Many B2B customers will hold off paying year-end invoices until January in order to bolster their books. Take a look at historic payment trends to see which customers followed this path last year. For new customers, reach out to accounts payable and ask them whether they have December year-end. Before you act, however, consider your tax strategy. Do you want to count that income on this year’s tax return or would it make sense to reduce your amount of taxable income for this year and go along with a late payment?
5. Reach Out to Perpetual Late Payers
Similarly, chase customers who are perpetual late payers. Ask them about their holiday season payment schedules. Remind them of your terms and the different methods they have of paying you.
6. Have a Cash Back-Up Plan
Whether it’s your cash cushion or access to invoice financing (a great way to quickly get the cash you’re owed, not to be confused with invoice factoring or payday loans), be prepared for the inevitable. Cash flow problems affect us all. Statistics vary, but somewhere in the region of 60% of small businesses deal with cash flow problems each year, while 80–90% of businesses that close their doors do so because of cash flow issues. That’s the worst-case scenario, but by having a plan in place for those highs and lows, you’ll close the year on a solid footing.