The summer holidays can be a challenging period for small and medium-sized enterprises (SMEs), particularly when it comes to managing credit control. Delayed payments, reduced business activity, and staff shortages can all contribute to cash flow pressures that, if not managed effectively, can disrupt operations and growth. Here, we explore common struggles faced by SMEs during the summer and practical strategies to overcome them.

 

Common Struggles

  1. Delayed Payments

    • Customer Unavailability: Key decision-makers at client companies often take annual leave, resulting in delays in invoice approvals and payments.
    • Reduced Business Activity: Many industries experience a natural slowdown during the summer months, leading to slower payment cycles.

  2. Staff Shortages

    • Employee Holidays: Credit control personnel taking time off can lead to a temporary reduction in workforce and impact efficiency.
    • Continuity Issues: Without sufficient cross-training, the absence of key staff can disrupt credit control activities.

  3. Cash Flow Pressures

    • Lower Inflows: With delayed payments and reduced business activity, maintaining a healthy cash flow becomes more challenging.
    • Increased Expenses: Summer can also bring higher operational costs, such as increased utility bills.

  4. Communication Barriers

    • Difficulty Reaching Clients: It can be harder to contact clients for payment reminders or to resolve disputes due to their holidays.
    • Internal Communication Gaps: Staff on leave can lead to gaps in internal communication, further affecting credit control efficiency.

 

Practical Strategies

  • Proactive Planning

    • Advance Invoicing: Send out invoices well in advance to account for potential delays. Clearly communicate the importance of timely payments before clients go on holiday.
    • Payment Terms Review: Consider offering early payment discounts or adjusting payment terms to encourage timely payments during the summer period.

 

  • Automated Systems

    • Use Automation Tools: Implement credit control software to automate invoicing, payment reminders, and follow-ups. This ensures continuity and efficiency even with reduced staff.
    • Online Payment Options: Promote the use of online payment methods for faster processing and convenience for clients.

 

  • Staff Management

    • Cross-Training: Ensure multiple employees are trained in credit control tasks to cover for each other during holiday periods, maintaining critical functions without disruption.
    • Outsource Staffing: Consider hiring Outsource Credit Control Staff to assist with credit control during peak holiday periods.

 

  • Enhanced Communication

    • Regular Updates: Maintain regular communication with clients regarding their payment status. Inform them of upcoming due dates and emphasise the importance of timely payments.
    • Flexible Arrangements: Be understanding of clients’ situations and offer flexible payment arrangements if necessary, such as instalment plans for those facing temporary cash flow issues.

 

  • Cash Flow Management

    • Forecasting: Prepare detailed cash flow forecasts to anticipate potential shortfalls. Plan for contingencies and ensure access to emergency funds if needed.
    • Reserve Funds: Maintain a reserve fund to cover operational expenses during periods of delayed payments. This helps buffer against temporary cash flow disruptions.

 

  • Relationship Building

    • Client Engagement: Use the quieter summer months to strengthen relationships with clients. Personalised communication and attention can foster goodwill and encourage timely payments.
    • Negotiation: Engage in open discussions with clients about their payment capabilities and negotiate terms that are mutually beneficial.

 

  • Monitoring and Reporting

    • Regular Reviews: Conduct regular reviews of accounts receivable and follow up on overdue invoices promptly. Identify patterns and address issues proactively.
    • Detailed Reporting: Provide management with detailed reports on the status of receivables and any potential risks. Highlight actions taken and proposed solutions.

 

Case Example

Scenario:

An SME in the manufacturing sector faces a cash flow crunch during the summer due to delayed payments and reduced business activity.

 

Solution:

Outsourced Credit Control – Use FJCM that specialises in credit control support solutions for all businesses.

  1. Advance Invoicing: The company sends invoices earlier than usual, along with reminders to clients about upcoming holidays and the importance of timely payments.
  2. Cross-Training: Employees are cross-trained to handle credit control tasks, ensuring coverage when key staff are on annual leave.
  3. Flexible Payment Terms: The SME offers a small discount for early payments and sets up instalment plans for clients who request extended payment terms due to their own cash flow issues.
  4. Automation: Credit control software is implemented to automate payment reminders and follow-ups, maintaining efficiency despite reduced staff.

By adopting these strategies, SMEs can better manage credit control challenges during the summer holidays, ensuring smoother operations and maintaining healthy cash flow. Planning ahead, leveraging technology, and maintaining open communication with clients are key to overcoming the seasonal hurdles that summer brings.

 

Outsourcing your credit control is a sure-fire way to prevent your business’ finances from suffering today, tomorrow, and beyond. Call us at 01492 22742 or email [email protected] to find out how we can help you.