- 07 Jan
Avoiding The New Year Cash Trap . . .
It happens every year, we see an increase in new invoice finance enquiries (factoring and invoice discounting) in the New Year caused by the "New Year Cash Trap" causing cash flow problems.
In the run up to Christmas customers generally slow down their payments to suppliers, partly due to their own customers slowing down their payments and partly due to staff holidays. This puts an added pressure on the business' cash flow after the holiday period once everyone gets back to work and the invoice chasing calls (from their suppliers) start again in the new year. This is why lots of businesses fail or decide to give up trading after the New Year.
The ways to minimise the pressure caused by the New Year cash trap are:
- Negotiating longer terms from suppliers (not easy!).
- Factoring or invoice discounting - to bridge the credit gap between raising your invoices and getting paid (so you effectively get paid immediately).
- Planning for the inevitable delays that will come over that period - hold back on non essential payments.
- Increase your credit control activity pre-Christmas - chase your invoices early and get promises to pay whilst people are still at work.