The summer months can represent a difficult time for companies’ cash flow.Internally, resource can become stretched as staff disappear on summer holidays and take time off to look after their children during the school break.
And particularly during good weather and high-profile sporting events (the World Cup will surely grip the nation), the temptation is there for some to ‘reward’ themselves with an impromptu day off. There are also the external factors presenting extra challenges too.
Seasonal variations are common amongst business and, unless you’re an ice cream parlour or sunglasses manufacturer, the summer is often the slowest time of the year and many businesses see activity and new orders fall. All of these challenges combined can have a significant impact on cash flow which could result in businesses making payments late or even not at all.
This can have a serious knock-on effect throughout supply chains, as without payments coming in on time businesses will be unable to meet commitments of their own. As well as this, your own internal resource can be stretched as a result of summer holidays and impromptu sick days, meaning that you have less manpower to dedicate to your credit management. Without enough resource to dedicate to chasing payments you may find that more than usual go overdue.
This could be a genuine mistake as without a courtesy call they may simply forget to make payment, but it could also be taking advantage of your position. So, what you can do?
1. Plan for holidays
If your customers have a shut down period or the person in charge of paying you takes a vacation, you may find that your invoices go overdue which can negatively impact your cash flow. So, always be sure to plan ahead and make sure that you know exactly what your customers’ plans are for the summer months. You can find out this information by putting in a courtesy call to your contact. If this call reveals that the person in charge of paying you will not be around to make a payment, find out who has been tasked with dealing with payments in their absence.
2. Adopt seasonal payment incentives
If you know that you normally struggle to collect payments in the summer you could benefit from adopting a seasonal payment incentive. By offering a discount to those who pay early you encourage your customers to make prompt payments, which can protect your cash flow. Whilst bringing in less money may seem counterintuitive, sometimes it can be more beneficial to be paid the majority of an invoice’s value early than receiving the full amount outside of terms. Especially if a late payment could lead you to make late payments of your own.
3. Manage your staff more effectively
The summer months are the most popular time of year for staff holidays which can leave your remaining employees overstretched. This not only dampens morale but it can also have a negative impact on the quality of your credit management. So, try to stagger staff holidays so that you always have enough internal resource. Or, consider hiring temporary workers to pick up some of the workload.
4. Get help
If you’re struggling to keep on top of late paying customers you could benefit from outsourcing your overdue debts to a collections agency. They will take responsibility for chasing your unpaid invoices and use their expertise to maximise the chances of recovery. This will allow you to regain the time and resource to focus on newer debts knowing that your aged debts are in safe hands. Plus, with a whole team to rely on, debt collection agencies aren’t affected by staff absences as there will always be someone available to take on the account.
Alex Hilton-Baird, Managing Director, Hilton-Baird Collection Services