6 tips for how small businesses can deal with holiday payment procrastination
As the busy holiday shopping season ramps up, many small business owners may find themselves trying to juggle countless responsibilities and obligations. From managing employees to ensuring inventory is on the shelf, this hectic time of year can create an environment where important details fall through the cracks. Working capital and cash flow are aspects that have the potential to take a back seat to other matters.
Unfortunately, poor cash flow can lead to a lack of working capital that has the potential to derail a sales or marketing strategy, or leave a small business without enough funding to pay employees. One of the best ways small business owners can overcome the problems associated with clogged cash flows is by implementing policies to deal with payment procrastination.
Delayed payments from clients, customers and distributors can be a major pain point any time of the year, but it’s especially pronounced during the holiday season. This creates an even bigger problem since this is also the time of the year when small businesses can be most reliant upon this crucial capital.
Consider these six tips for dealing with payment procrastination during the holidays:
1. Get everything in writing
Although many small business owners might feel that a handshake and a customer’s word that they’ll pay on time will suffice, this friendly method of closing a deal does not go far enough to guarantee timely payments. People are much more inclined to pay off a bill when there’s something in writing tying them to the obligation. And, unfortunately, due to their smaller size and general lack of major influence, some clients, customers or distributors might feel emboldened to engage in unethical and unequal practices that leave the small business empty handed. Having terms, itemized invoices and any contractual payment obligations can be used to leverage individuals or companies to pay their invoices in a timely fashion.
2. Keep track of purchase orders
Before the accounts payable department pays an invoice, owners should be sure to utilize a purchase order request from anyone placing an order. Keeping the purchase order request with the invoice helps owners keep track of the payments. This provides tangible evidence that owners can rely on when trying to receive moneys in a timely fashion.
3. Cut billing times
After providing goods or rendering services, many small businesses still give clients and customers a repayment period. Even with 30 to 90 days to close out their invoices, many people still procrastinate when it comes to paying their bills. Instead of waiting one to three months or longer, reduce the billing times to speed up the payment process. In addition, if bills aren’t paid on time, be diligent with sending out notice of late payment, and even consider adding on late fees to further incentivize clients and customers into paying.
4. Expand payment options
Getting paid in cash is always ideal, but many people no longer carry hard money in their wallets. Providing additional payment options allows customers to use whichever method they’re most comfortable with and it can also speed up how quickly you get paid. Although processing credit cards comes with a small transaction fee, it also means companies get paid immediately and don’t have to worry about bounced checks or unpaid invoices.
Further, having a mobile payment option also allows customers to zero out their bills via a digital wallet. Many mobile credit card readers like PayPal, Square or Intuit also let small businesses take payments on the go, whether it’s a craft fair or a local holiday festival.
5. Build relationships
Small businesses billing their clients and customers post-transaction must rely on a good-faith effort that the other side will pay their bills. Some individuals will do anything they can to wiggle out of a financial obligation. Often, these people will try to toss out excuses about why they can’t pay, whether it’s disputing the amount owed, saying they’re waiting on someone up the supply chain to pay them first or by just ignoring requests for payments. However, by establishing a professional relationship with these customers and clients, small businesses can potentially personalize the experience and reduce the drive to skip out on a payment
6. Consider alternative lending
No matter how much planning small business owners undergo and regardless of how many new policies are put into place, some customers and clients will still procrastinate on paying their invoices, sometimes for months. When this happens, it can turn a company’s cash flow into a trickle.
Small business owners who find their working capital getting low due to delayed payments from clients and customers can bridge this gap by taking advantage of the many benefits of working with an alternative lender. Whether it’s a working capital or small business loan, or using a merchant cash advance, the easy application process and rapid approval period gives small business owners the money they need when they need it.