By Geoff Scofield, Westlawn Finance MD & CEO 21 October 2014
For many businesses, especially those outside the tourism and hospitality sectors, the period between Christmas and the end of the summer school holidays can be a very quiet time. Regular customers leave town for a family break by the beach, or else suddenly realise they’ve overspent on Christmas and need to tighten their belts come January. Meanwhile, business customers may shut down for a few weeks, or else suffer their own downturn in business.
This post-Christmas wind down can place a strain on business cash flow … and it happens every year.
So this year, plan now to get your cash flow in shape for the summer holidays with these 8 easy-to-implement steps.
1. Invoice immediately
Send invoices to your business customers on the day you provide your goods or services. This way, the transaction will be fresh in their minds when they receive your invoice and therefore they’ll be more likely to pay promptly than if they were to receive an invoice weeks after the event.
2. Email invoices
When sending an invoice, make a habit of emailing a copy to your customer also. This will appear immediately in their inbox and provide another reminder for the business to pay. Emailing also provides you with a record of the invoice and when it was sent in the event it goes missing or there’s a dispute.
3. Give detailed descriptions
Still on the subject of invoices, it will benefit both you and your customer to include a detailed description on the invoice of the goods provided or work carried out. This way, your customers will be less inclined to query the payment.
4. Set payment expectations early
With new customers, set your expectations up front about credit terms. Don’t let new customers fall into bad habits in terms of tardy payment. Build a solid relationship from the start so you can reign in wayward debtors with a friendly reminder.
5. Electronic payment into your account
Encourage your customers to make electronic payments directly into your bank account rather than sending cheques through the mail. It’s convenient for both you and your customer. As encouragement, consider offering a small discount to customers who choose this option.
6. Early payment discount
Speaking of discounts to reward good behaviour, consider offering a discount for early payment in addition to discounts for paying via direct credit into your bank account.
7. Match your debtor days to your creditor days
By matching your debtor days to creditor days, you’ll get paid from your customers before you have to pay your own suppliers.
8. Don’t wait until January
To avoid your cash flow turning into a trickle in the new year, you need to act now. Don’t wait until January to enact your cash flow plan … by then it will be too late. Remember, you’ll have to plan for the additional costs of Christmas functions, holiday loadings and public holiday penalty rates.
And finally, don’t let your customers slip into old habits once business picks up again.
How Westlawn can help
While following these simple steps will help improve your summer holiday cash flow, sometimes, you’ll still need additional funds to get you through the summer slowdown.
At Westlawn, we can assist your business to better manage those cash flow fluctuations with flexible working capital finance options such as:
Business line of credit – providing flexibility to draw down funds at any time to suit your cash flow requirements through a non-structured loan with no set repayments.
Term loans – available for any specific business purpose such as purchasing plant and equipment, business expansion, or for managing cash flow. Flexible loan terms and interest rate options are available.
To find out more, contact us today on 1300 WESTLAWN (1300 937 852).