Don't get crunched over your cash flow

By NIC PATON FOR MAILONLINE
Updated: 07:54 EST, 20 December 2009

Business owners are being warned not to let themselves be cash-flow crunch victims this Christmas by companies using the long break to avoid paying invoices on time.

Keeping in touch: Alison and Daniel Cutler

With many firms, particularly bigger employers, closing for two weeks, small businesses risk being left cashless or even broke by accounts departments shutting down or managers using the excuse of cheques 'getting lost' in the post.

Edward Rimmer, chief executive of Liverpool-based invoicing specialist Bibby Financial Services, says: 'It is a huge problem, particularly at this time of year, and can leave a gaping hole in your cash flow - especially if things don't get back to normal until the second week of January.

'It puts a lot of pressure on people coming into the New Year and could even mean a rise in insolvencies in the first two months of the year.'

Bibby says firms should urgently review their cash flow and credit control, ensure invoice terms and conditions are as watertight as possible, chase payments promptly and speak to suppliers or bank managers about any likely problems.

Daniel Cutler, 37, and his wife, Alison, 35, run Marketing Fashion, a sportswear distribution business in West Kensington, London, and the run-up to Christmas is one of their busiest times.

Daniel believes that maintaining regular contact with customers is vital to keep on top of payments and spot any potential prob-lems.

'Most of our clients are very good, but some retailers inevitably do not want to pay for goods until they have seen some Christmas sales movement,' he says.

'There have been times where we have had to hold off making deliveries because clients have not paid the previous invoice.'

The company uses Bibby for invoice management, but Daniel believes that it is essential to keep track of what has come in and what is outstanding. He also advises offering a discount in return for early payment.

He says: 'Though we're small, we do understand when people have cashflow problems, but they have to talk to us. It's when it all goes quiet that it becomes a concern.'