Our experience shows that in December and January, on average 6 in 10 customers pay late. But by following these 6 simple steps towards timely payment, you can ensure that your business is doing all that it can to protect cashflow.
6 in 10 clients pay late
It’s no secret that business slows down during the Christmas period. Offices are closed, staff are travelling, and paying invoices can become the furthest thing from people’s minds. Because of this, winter can represent a particularly challenging time of year - especially for SMEs - for whom cashflow is a company’s life-blood.
Payment on invoices that would usually be dealt with in a timely fashion is often pushed back to mid-January, and in fact Lovetts research shows that the average number of days payment is received after an invoice falls due rises to 48 days in December and 51 days in January.
6 steps to avoiding a lump of coal
While you can’t single-handedly reverse the Christmas slowdown, you can take the following 6 steps to ensure that your business is doing all that it can to effectively manage cashflow:
- Check that your customer has received the invoice: a common reason for late payment is a customer claiming that they have not received your invoice. By remaining diligent and following up on sent invoices in plenty of time, you leave the option open to resend the correspondence BEFORE the Christmas and New Year’s break.
- Offer incentives to customers who pay in advance: Christmas is the perfect time of year to show appreciation for customers who pay on time! You could include an option on end of year invoices for prompt payers to receive a small discount.
- Chase up overdue invoices immediately: obviously it goes without saying that as soon as invoices fall due you should chase them up. You are entitled to this payment. Customers will often have a lot to wrap-up as they approach year end, and a small nudge can be enough to remind them of what their priorities should be.
- Target customers with a history of late payments: do not be afraid to be robust, especially with customers who are consistently making late payments. Companies will often have a handful of customers who are responsible for the majority of late payments, so targeting these people early is a good exercise in helping to protect cashflow.
- Send a Letter Before Action: on average the Lovetts Letter Before Action (LBA) is effective in 86% of all cases, with no further action being required. At just £1.50 for an email version, it’s a fast, efficient way to stay on top of outstanding payments.
- Issue Court Proceedings: whether it is approaching Christmas or not, if pre-action correspondence has been ignored then again, you are entitled to this payment, and it is time to consider legal action. The first step here is issuing a court claim, and you can find out more here.
6 things to remember this Christmas
In other words, the key to ensuring that your business has a healthy balance sheet during the holiday period is to be proactive in your credit control and debt recovery activities. While other businesses may already be winding down for a prolonged Christmas break, extra diligence can help to ensure Christmas cashflow. So in beginning your run up to the 12 days of Christmas remember that on average 6 in 10 customers pay late, but you can take these 6 steps to avoiding a lump of coal!
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