The truth is that managing the payment of your business’s invoices is a task that requires constant attention throughout the year. Therefore, even now in October, if you haven’t been following the payment of invoices and resolving the issues on why invoices haven’t been paid, it may be already too late to expect payment of all your unpaid invoices by the end of 2023.
The best way of testing the accuracy of the above information, is of course, to start your increased payment efforts now. After all, there are only three months of month end financial payment cycles to go between now and the end of 2023. In addition, it would also be important to record your efforts to get paid and then analyse the results in early 2024.
There are many factors at play which will affect whether you get paid or not by the end of each calendar year, or financial year for that matter. However, the concentration on the year end calendar is particularly important for one particular reason, CHRISTMAS.
Traditionally, many businesspeople will be under pressure to pay parties that they owe money to by Christmas or by 31st of December. These parties include your customers and their customers. In addition, many of these parties will also have the usual additional expenses which are due during the Christmas and New Year period.
Furthermore, and historically, many of the businesses which are in financial difficulties, and there are all too many of these businesses currently, will try and avoid paying their creditors in order to pay their employees first. This action enables their employees to have one last “pleasant” Christmas and New Year before the business closes down.
The problem for all businesses which extend credit these days is that many will be operating short-staffed in the credit and accounts area. As a result, they will be unable to make timely contacts for unpaid invoices, or have the time to follow up on the issues relating to outstanding and unprocessed credit claims.
Furthermore, your program for payments will run into further difficulties if your sales and management are avoiding the processing of any customer credit claims. After all, by processing these claims this will affect their sales budgets and in turn, may put their sales targets and bonuses at risk. In such situations, this leads to yet another problem. That is, when customers with outstanding credit claims that haven’t been processed and want these claims to be resolved quickly to keep their own financial figures in order. If this case, the customer(s) may hold up all payments for all authorised invoices until the claims are processed.
Unfortunately, many businesspeople still treat credit and accounts receivable as an expense, or as a debt collection unit, rather than a potential profit centre. As such, they fail to learn the lessons of the past about the value adding extras which credit and account receivable employees add to the business. These benefits include maintaining cashflow, resolving the causes and processing of credit claims, and an accounts receivable asset with a credible balance day figure. Instead, management in these businesses finds their cashflow targets are missed and creditors remain unpaid.
The fact remains, and is still today, often ignored by management, that managing the payment of their business’s invoices requires constant attention throughout the year. Therefore, waiting to start follow up actions for unpaid invoices in December in an effort get paid by year end, is just too late. Furthermore, as a result, any resources used to achieve the main objective of being paid by year end, are also largely wasted.