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As a small business owner, you know how stressful end of year can be when it comes to managing your cash flow and balancing the books.

With so many people going on leave – and so many businesses shutting down entirely over the holiday season – it’s not unusual for your invoices to be left languishing in somebody’s inbox until well into in January.
Here are five tips to help you avoid the end of year cash flow crunch and start the New Year with your finances intact.

1. Invoice early

This isn’t the time of year to let your invoices build up. Keep your cash flow flowing by asking your customers for upfront payment where possible – particularly if their staff will be on leave when your payment would normally be due – or by invoicing on delivery with seven-day payment terms.

If it’s too late to change your terms for regular customers, give them a friendly heads-up when you’re about to send an invoice, and ask them to pay before the end of the year.

2. Get personal

Get in touch with customers who will shut down over the holidays before their staff start disappearing on holidays to chase outstanding payments and flag upcoming invoices.

Taking a personal approach keeps your customer onside, and reminds them that you run a small business that has your own bills to pay. This can be particularly important if your clients don’t have a small business background, and may not realise how much your cash flow would be affected by delayed payments over the holidays.

If you’re concerned that chasing payments yourself might impact your relationships with clients, ask your accountant, one of your staff, or even your partner to take on this role instead.

3. Forecast and plan

Create a cash flow forecast for your business – what’s going out, what’s coming in, and where the gaps exist. This will give you the insights you need to identify any cash flow shortfalls, and develop a plan to address them.

As part of this plan, make sure you analyse whether it’s financially viable for you to keep your small business open over the holiday period. For example, if you run a café in the CBD, it’s likely your customers will be away over the holiday period. The smart financial choice may be to shut down your café to save on operating costs… and take a well-earned break.

4. Establish and enforce Terms and Conditions

If you don’t have payment terms and conditions, get them in place as a priority. These should outline when you’ll issue invoices, if deposits are required, your payment timeframes, and so forth. Talk to your accountant, lawyer or business advisor to determine the best way to implement these legal requirements for your small business and industry.

Once you’ve established your terms and conditions, you must be prepared to enforce them. You don’t necessarily need to jump straight to threats of legal action or debt collection if payments are late. But if an invoice remains unpaid, you’ll need to take action to protect your business. If necessary, you can also consider getting a debt recovery service to help speed up payments.

5. Keep vetting new customers

The end of the year can be a great time to get some new customers on your books, particularly if your existing ones are shutting down for the festive season. But don’t let the promise of holiday income cloud you from assessing new clients thoroughly.

Keep doing your homework and running your normal credit checks on prospective clients. If your new customer asks for credit terms, weigh up the risk and protect your business by:

  • Having them sign a credit application that includes their ABN and ACN
  • Including clauses in your terms and conditions covering non-payment to make the process easier if you need to recover a debt down the track
  • Setting a credit limit at the lower end of the scale (as you can always negotiate new terms if they become an ongoing customer).

Need help managing the holiday season cash flow crunch? Talk to our friendly team on 1300 882 867 or apply online for a cash flow loan now.

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