You are a business in Australia, it is post-Christmas, it is school holidays and it is January and it happens every year. A lot of Australian business shuts down or at least goes slow, particularly small to medium business and particularly production and manufacturing.
While this is OK if your business is one which deliberately takes a break, of others which need to keep going, it could cause problems and a problem with cash flow could top the list. If a fair proportion of your customers have shut down for the period, the chances are you won’t be paid.
One thing you shouldn’t do is worry about the situation, as it will not make it any better.
If you need to keep the business operational, there are things you could do. A quiet time is a good time to do a stocktake and see what is selling and what is stagnant.
Refurbish the premises, make it brighter, update the equipment, making the work environment better for staff and customers, it could make staff more productive and customers happy to return.
Review databases. Is there data which can be deleted, such as past customer information, stock no longer held? Outdated information can skew reports generated from the database and limit their effectiveness. Customers which haven’t been contacted for a while could present opportunities, why haven’t they been contacted? It is good to renew the relationship.
You could look at the policies and procedures, see if they can be updated, revised or even eliminated. Is there something in your procedures which is holding the business back or due to new technology being used, is no longer needed?
One area of procedures which could be overhauled, is what do you do this time next year? Will you still be in the same position where your cash flow dries up in January? What can you do to ensure the business is still cashed up?
You could make contingency arrangements with the customers you know won’t be operational but that takes time to organise and may not be successful. The other option is to consider factoring.
Factoring – cash flow debtor finance, invoice factoring – ensures regular cash flow and access to money in a much shorter time frame than waiting for customers to pay invoices which could even take months. Factoring enables a business to have revenue aligned with known and regular expenses such as payroll, services costs and other operating costs.
Receiving money based on receivables almost immediately and regularly allows much better forward planning, catering for the slow periods experienced by any business.
Factoring can reduce costs associated with accounting and debt collection and with regular cash flow to satisfy your own suppliers, you could negotiate better terms and conditions which could also save you money.
So the new procedure is to use factoring and the next January which comes around you will have the funds from your December invoices in December not February.