Christmas is nearly upon us and it’s the season to be jolly!
But will you be feeling as full of festive cheer at the end of December when you find your outstanding invoices haven’t been paid?
With many businesses and industries shutting down well before the start of Christmas, there’s a narrow window of opportunity for your customers to pay you.
Research by Bacs shows that the UK’s small to medium size businesses (SMBs) are owed £14.2 billion in late payments. Scotland has the highest percentage of SMEs reporting late payment issues (46 per cent), followed by Northern Ireland (39 per cent), England (37 per cent) and Wales (34 per cent).
January is traditionally the leanest month for most companies: the last thing your business needs to start the New Year with it a long list of outstanding debts and a poor cash flow forecast for the first quarter of 2020. So, how do you make sure you’ll get paid before Christmas?
Here are our 5 top tips for speeding up that Christmas payment process.
1. Don’t forget the early Christmas shutdown
Normally, accounts payable teams will set up their monthly payment run in the last few days of the month, ready to pay you in the first week of the new month. But many companies’ back offices will close this year on Friday 20 December, making it even more important that you’re organised and get your invoices out in plenty of time, along with a statement of any other outstanding payments you’re waiting on.
With the Christmas holidays falling when they do (and the mince pies and prosecco flowing), invoices that arrive in the last two weeks of the month are likely to miss the cut-off.
If you're taking payments through GoCardless, you'll need to create the payment by 4pm on Tuesday 17 December – this will mean you receive you pay out on Christmas Eve. (For new mandates, you’ll need to create the payment before 4pm on Monday 16 December)
To make sure you get on that December payment run:
Send your invoices over as early as possible.
Include a full statement of all outstanding invoices.
Make sure your payment terms and due dates are crystal clear.
Make it clear that you expect payment before Santa arrives.
2. Get to know who’s paying you
Sue in Sales may be your main contact and the person you have the working relationship with, but it’s not Sue who actually pays your invoice (she’ll be at the pub in a Santa hat, no doubt).
To improve your chances of getting paid:
Find out who in the accounts payable team looks after your account.
Get to know them by name and get their direct business email and phone number.
Build on that relationship and get to know when and how they usually pay – and make sure you’re included in that all important Christmas payment run.
3. Prioritise customers with December year-ends
A common way for a business to make its year-end accounts look a little more favourable is to hold off on paying outstanding bills until after their year-end date.
If you have customers with 31 December year-ends, they could possibly hold off paying you until they absolutely have to – with a view to leaving more cash in their own kitty.
To get around this thorny problem:
Do some research at Companies House and find out which customers have December year-ends.
Send out your invoices to these customers as early as possible (preferably online).
Talk to their accounts payable team to reiterate your payment terms and remind them that you expect invoices to be paid according to the usual timescale.
4. Move to online invoicing
In a world where even HMRC is going digital, there’s no excuse for not using online invoicing to speed up your payments.
Even the most basic cloud accounting packages will give you the option to send your invoices to clients online via email.
Using online invoicing will speed up payment because:
It removes the need for printing hard-copy invoices (as well as the time and cost of sending them in the post).
It gets your invoice sent by email directly to the customer’s finance team (and removes the worry of your paper invoice getting lost or delayed in the Christmas post).
It gives your customers an easier way to pay, using a wide variety of payment gateways.
5. Improve efficiency with Direct Debit payments
The easier you make it for customers to pay you, the quicker you’ll see the money rolling in. And that’s very good news for your cash flow situation as you start the lean months of 2020.
Setting up Direct Debit payments with your customers is a hugely efficient way to take both recurring and ad-hoc payments:
You take the payment directly from the customer’s bank account at a pre-agreed time.
There’s no waiting around for your customer’s accounts payable teams to pay you.
You’ll know your cash flow position precisely every month, which means you can be far more confident when spending money on the business.
For more information on how to set up customers to use Direct Debit, see our quick guide.
GoCardless wishes you a very merry (and prosperous) Christmas
So, we hope these 5 top tips have given you some really practical ideas for getting paid on time this month. With a few simple steps you can really make a big difference to those late December payments.
And that means you can start the New Year with money in the bank, a happy finance director and a big smile on the MD’s face.