5 tips to get your outstanding invoices paid before Christmas
The best present you can give your business this Christmas is a healthy cashflow – here’s how to clear your debts and get paid on time this December
Christmas is approaching and the best present you can give your business is healthy cashflow!
Late payments are a widespread problem for small businesses: according to the Federation of Small Businesses (FSB), on average, 30% of payments are late.
Christmas can be a useful deadline for chasing outstanding invoices and if you do it right, you’ll avoid starting the New Year with a long list of outstanding debt.
Here are five tips for things you can do, in the short and longer term, to make sure your invoices get paid before Christmas.
1. Send your invoices in early December
For most of the year, accounts payable teams set up monthly payment runs in the last few days of the month, so you receive your payment in the first week of the new month.
But in December, accounts teams tend to move their processing earlier in the month so everything is complete before Christmas. This year, Christmas falls on a Monday, so accounts teams are likely to have processed their payment run by Friday 22 December.
To make sure you get paid, get your invoices out in plenty of time in early-mid December, along with a statement of any other outstanding payments you’re waiting on. Invoices that arrive in the last two weeks of December are likely to miss the cut-off.
Be sure to include payment terms and due dates, and clearly state that you expect to be paid in the December payment run.
2. Start with customers that have December year-ends
If you want to prioritise your efforts, start by looking at customers with 31 December year-ends.
It’s not uncommon for businesses to hold off paying some bills until after the year-end date in order to make accounts look more favourable. To reduce the risk of this, get in touch with customers that have December year-ends first, and send those invoices as early as possible and preferably online. You can find out companies’ year-end dates at Companies House.
Once you’ve sent the invoice, talk to the accounts team and remind them that you expect the invoices to be paid according to your terms (and before the month end).
3. Build a relationship with the accounts team
Your main customer contact might be someone in sales, marketing or product, but the person that pays you is in the accounts payable team! To improve your chances of getting paid, find out who in the accounts payable team looks after your business and get to know them. Make sure you know their name, business email and phone number in case you need to chase.
Of course, last minute attempts to woo the account team before Christmas, might not be effective: but there’s no time like the present to start building that relationship for next year.
4. Make sure you’re invoicing online
There are now a wide range cost-effective cloud accounting packages available to start-ups, which all allow you to send your invoices to clients online (and a lot more besides), including Xero, Sage, QuickBooks and KashFlow.
Online invoicing cuts down on admin and allows you to get your pre-Christmas invoices out in good time. Email your invoices directly to your customers’ accounts team without having to print and post hard-copy invoices and without having to worry that it might get lost or delayed in the Christmas post.
What’s more, online invoicing makes it easier for your customers to pay you giving them a wider variety of payment options.
5. Automate payments with direct debit
Avoid chasing invoices by automating your payments using direct debit. A lot of businesses don’t realise that direct debit can be used to collect variable amounts on variable dates, so it’s perfect for those who collect payments by invoice.
Direct debit is a system you can ‘set and forget’, meaning you can count on being paid on time and avoid awkward conversations with customers about money. There’s no need to wait for an accounts payable teams to pay you: simply take the payment directly from the customer’s bank account at a pre-agreed time.
GoCardless gives start-ups and small businesses access to online Direct Debit. It’s free to set up and you pay just 1% per transaction with a cap of £2 (and no hidden charges).