In this article we discuss the cash flow problems many Australian businesses face in January due to late invoice payments. We provide our tips for minimising your cash flow gap and to improve your stress levels.

Read this article to avoid googling “unsecured business loans” at 2am on the 5th of January!

The silly season is well and truly here, and businesses across Australia are madly making the most of this seasonal peak to maximise their revenue for the calendar year. Whilst this is well and good, for most businesses you have to spend money to make money, so their outgoings are proportionally up at the same time.

Xero’s research into late payments published in November 2018 demonstrates that for their 500,000+ subscriber base, on average invoices with 30 day payment terms were paid 6 days late. Even worse 47% of invoices issued paid late. Clearly late payments are a problem in Australia. You can read the full report here.

In January, part of the problem relates to many Australian businesses shutting down over the Christmas and New Year period. If you are lucky some staff head back into the workplace around the 7th of Jan. It’s not always the accounts payable team either…. They may still be on the beach, watching the cricket or managing kids during the long summer school holidays.

A common experience at this time of year is that your own bills pile up, particularly after a seasonal peak and there can be a real cash flow gap between what’s come in before Christmas and who needs to be paid in early January.

Here are our 5 tips for getting paid in January:

1.  Be ruthlessly up to date with your invoicing

   There is no point doing a catch up on your customer invoicing in the week before Christmas. Anything due after the 21st of December is likely to be ignored until they are back on deck. Resource your invoicing team appropriately so they are completely up to date right through December.

2. Know when your customers are out of the office

   Take the time to have a conversation with your relationship contact at your suppliers and vendors and know when they shut down. Create a timeline or spreadsheet of your major clients so you are aware of when they are off. You could also see when they paid last year’s invoices to give you an idea of where any gaps might be.

3. Have clear payment terms

   We know it is an obvious point, but your invoices should have clear payment terms. Reminders should be sent within a couple of days of when they fall due.

4. Don’t allow credit for customers that owe you more than an agreed amount

   If a customer owes you thousands of dollars, consider pausing their account until overdue invoices are paid. There is nothing worse than advancing product or services to a serial late payer

5. Have a line on your invoice that specifies costs involved in late payments

   This involves ensuring that your payment terms include a proviso for late payments. You might include on your invoice a statement that says any amounts outstanding after 30 days after the invoice date are subject to an interest charge.

But We Have Tried All That!

Sometimes even when you are invoicing and collecting funds in a best practice manner, January just performs poorly for cash flow. This is where we come in!

As long as you qualify, Debtor Finance lets you get paid for your outstanding invoices by us. We then collect the payment from your customer when it falls due. Effectively you are getting up to 90% of the value of your invoices paid early for an agreed fee. It is cost effective and quick to arrange.

Invoice Money is a boutique Invoice Factoring provider who has been in operation since 2012. We are based in Melbourne Victoria and have more than 60 years’ experience in debtor finance, commercial

finance and financial services.

How much does it cost?

At Invoice Money our fees are between 0.05-0.25% per day on outstanding balances. There are no lock-in contracts and you can arrange invoice finance for a single invoice or several.

We are well known for our integrity and confidentiality. We have advanced more than 60M in funds to Australian businesses since inception. Our reputation in the market is first rate and our boutique size means you will never be treated like a transaction.

Think back to January last year. Was it hard to manage? Hard to meet payroll, rent and supplier invoices due to late payments from your customers who have shut down? Save yourself the head ache this year and get yourself approved for invoice finance now.

If you are worried about cash flow problems in your business in January then look no further. If you are investigating finance options to solve cash flow short falls then look no further. Get in touch with our friendly team to discuss your requirements. You can contact our team in Melbourne or Sydney here.