The Christmas period 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 that your outstanding invoices haven’t been paid?
With many businesses and industries shutting down well before the start of Christmas, there’s a very small window of opportunity for your customers to pay you.
Late payments affect over half (51%) of the UK’s small businesses, according to research by the Federation of Small Businesses – and January is traditionally the leanest month for most companies. The last thing your business needs to start the New Year is a long list of outstanding debts and a poor cash-flow forecast for the first quarter of 2017.
So, how do you make sure you’ll get paid before Christmas?
Here are our 5 top tips for speeding up that Xmas 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 23 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. In fact, your customers’ will need to have submitted Bacs payments by 21 December at the latest for you to get that payment before the turkey and trimmings arrive on the Xmas Dinner table. If you're taking payments through GoCardless, the payment will need to be created by the 21st December (or the 19th December if you're adding a new customer).
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 with the customer 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 Xmas 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 on 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 and re-iterate your payment terms and that you expect the invoices to be paid in the usual timescale.
4. Move to online invoicing
In a world where even HMRC is going digital (yes, really, it was in the Autumn Statement!), 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 customer 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 2017.
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.
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. That means you can start the New Year with money in the bank, a happy finance director and a big smile on the boss's face.
From everyone at GoCardless, we wish you all a very merry Christmas and a wonderful holiday season.
Click here to find out more about how you can setup one-off, deferred and recurring payments with GoCardless directly from your QuickFile account.