factoring

Those who work in industries like retail see major cash flow increases during the holiday season. However, the vast majority see a major slump, and that could mean your business isn’t going to be seeing the regular cash injections it normally sees throughout the year. This is because most companies give their employees time off, people are distracted by their holiday to-do lists, business owners may be short on cash, and they’re probably struggling to get their own clients to pay, too. This doesn’t necessarily mean you need to resort to drastic measures like taking out loans or reducing your staff, but you can take steps to minimize the impact reduced inflows have on your operations and potentially increase what comes in.

1) Start with Good Predictions

If you’ve been in business for at least a year, you should be able to use your historical data to identify seasonal shifts. Take a look at your inflows from this same period last year and prior years to determine how much of a slump you normally have. From there, budget accordingly and minimize your outflows so you don’t spend the month upside-down.

2) Review Your Payment Terms

Many small-business owners give their clients 30, 60, or 90-day payment terms and only send out invoices once per month. Although it may seem like the nice thing to do or perhaps even “standard,” it means those invoices are going to the bottom of the pile and won’t get paid in a timely manner. That’s a problem in and of itself, but the longer an invoice remains unpaid, the less likely it is to be paid at all. For better results, send invoices immediately after work is complete or products have been delivered, and limit the amount of time clients have to pay to a month at most. You’ll create even more urgency by offering an incentive for prompt payment and/or having a late penalty fee.

3) Follow Up on Debts

If someone is even a day late on payment, you or someone in your office should be following up to collect. Even if the client can’t pay right away, following a collections process will keep your invoice at the forefront of their minds and at the top of the stack.

4) Leverage Factoring for Prompter Payments

Invoice factoring involves selling your invoices to a factoring company, like Interstate Capital. We pay the balance to you right away and then follow up with the debtors to collect. That means you’re never stuck waiting for payments on any invoice you factor; it’s money in your account immediately. Best of all, factoring doesn’t rely on you or your business having good credit, so it’s a viable solution for more small businesses.

5) Hold Off on Purchases

If your business sees a seasonal slump, try to hold off until cash flow improves to make any major purchases. Many small business owners see this small window as ideal because it lets them squeeze in a purchase to get a credit come tax time. That is a valid point, but if inflows are down, spending cash you don’t have could cause serious issues. If you wind up in a situation where you absolutely must get new equipment during a low inflow period, explore options like leasing or renting, so your payments will be lower.

Let Interstate Capital Help Your Business this Season

Pockets a little light? Interstate Capital can provide payment on your open invoices in as little as 24 hours. Whether you simply need help getting through a holiday slump or would love to have prompt payments year-round, we can help. Get an instant online factoring rate quote now.