Don't let your cash flow give you a fright this Halloween
Halloween is here, but that doesn't mean you should let your cash flow give you a scare as we head towards the end of the year.
As tonight approaches, people will be preparing for October 31 with a mix of excitement and trepidation. But while many must face their fear of ghosts, ghouls and other ghastly things, SMEs are more likely to get a fright from their cash flow at this time of the year.
Overdue payments were 11 days late on average at the end of June 2018, according to illion figures. While the figure is an improvement on last year, this will come as scant comfort for small businesses that are financially struggling.
So what can SMEs do to improve their cash flow this Halloween and head into the new year with renewed confidence?
1. Trick or treat your debtors
You may have an overwhelming urge to egg the houses of your late payers, but that's not quite what we mean by trick or treating your debtors. Instead, consider adding late payment penalties or early settlement discounts to your invoicing terms.
Which one you choose may depend on whether you prefer the carrot or stick approach, but both can be effective in encouraging clients to pay before the deadline. However, just as kids merrily shout 'trick or treat?' at the doorstep, you must be clear about your invoicing terms up front to ensure clients are aware of their obligations.
2. Hit the streets early
Anyone who went trick or treating as a child knows that you only get the best lollies and chocolate by knocking on doors as early as possible before your neighbours run out. No one wants to get stuck with liquorice or the leftover coffee creams from last Christmas.
Similarly, your invoicing processes must be as quick and efficient as possible; the sooner you send off an invoice, the sooner you should receive payment. Make sure to chase unsettled accounts through friendly, polite reminders and set up alerts to ensure you are always on top of late-paying customers.
3. Shine a light on your cash flow fears
Halloween is supposed to be scary, but it's also meant to be fun. So don't let cash flow become the monster under the bed that you're too afraid to confront.
Hiding under the covers may make you feel better temporarily, but it won't resolve your long-term money worries. Shining a light on the situation is the best way to tackle your cash flow fears and ensure they don't snowball into bigger problems.
4. Don’t go it alone
In many horror films, there is a moment when a soon-to-be-horribly-murdered character has the dubious idea of splitting up from the rest of the group and investigating a suspicious sound without any back-up. Don't be this person.
Most SMEs experience cash flow problems, so it's important to have the right support when you need it most. There are a range of business finance solutions, such as debtor finance, that can help your organisation overcome any challenges ahead. Poor decision-making won't cost you your life like in the movies, but failing to address cash flow issues could put your livelihood at risk.
Are you ready to face your fears?
We hope our tips have armed you with the best defences against all the (financial) horrors that Halloween may throw at you this year.
October 31 may not be a big date in the business calendar, but the end of 2018 is fast approaching and many SMEs will want to head into the new year in a stable financial position.
If your cash flow is keeping you awake at night, contact a member of our team at Classic Funding Group to discuss how our business finance solutions can help.