How to: manage invoices and payments during the Christmas period
While the majority of construction workers tuck into turkey, exchange gifts and spend time with their families, businesses are expected to keep ticking over. However, with your accounts team either entirely absent from the office for the best part of two weeks (or with your office helmed by a skeleton crew), cash flow problems can quickly emerge during Christmas. How should you handle invoices and payments during the build-up to Christmas to avoid a painful new year?
You can’t chase payments when your staff are on holiday, so how can you limit the size of the gap in your cash flow? Here are few strategies to follow:
- Issue invoices During December, don’t delay when issuing invoices; make it a priority to send them out early, particularly if you send them through the post.
- Follow up invoices to ensure they’re received. A quick phone call a couple of days after posting or a call the day after emailing the invoice will suffice. Check to see that they can view the document you attached to the email, and remind them that the usual payment terms apply – despite the season.
- Suggest BACS over cheque. If you have clients who still like to pay by cheque, now might be the time to gently suggest that BACS would be preferable – neither party needs to worry about a cheque getting stuck in the Christmas post.
- Chase payments prior to their due date. Expect most offices to be barely staffed from the 19thDecember to the 27th this year (2015). For payments due within that window, start nagging early – at least a couple of days before offices close. Reiterate that you expect to receive the payment on time. Don’t be afraid to chase during this busy period; simply by reminding clients that you exist and you expect to be paid your invoice stands a much better chance of being processed before the Christmas break.
For many construction companies, it’s a two-way street: you’ll have your own invoices to pay during the Christmas period. Here’s how to approach these payments:
- Practice what you preach. Be fair to your creditors and pay up on time, even if that means paying numerous invoices on the final day at the office. In all likelihood they’ll be having cash flow problems too, and will appreciate timely payments.
- Discuss payment schedules. If your cash flow is in dire straits and your business won’t be able to pay invoices due during the break, discuss options with your creditors. Maybe you can adjust your usual payment schedules and pay half earlier than usual and the other half after the Christmas break.
- Don’t pay early. If you have a staff member in the office over the normal break period, there’s no need to make payments early. For example, if you have a payment due on December 23rd, that staff member should pay it via BACS on the 22nd or 23rd. You’ll still be meeting payment terms without needlessly compromising cash flow. Just ensure any payments like this are approved by the relevant people before the holiday begins.
Above all, monitor your finances closely as the Christmas break approaches. Track expected payments and outgoings using your accounting software and try to keep costs to minimum in the build-up to the festive period. If you are concerned about your cash flow during this time, you may be able to secure short term loans or could turn to invoice finance.