Improving December Cash Flow

Business owners face added stress in December when cash collections from receivables are typically lowest, but there are reasons that they decrease in December and also measures that can be taken to improve the problem.

Jerry L. Mills, the founder of B2B CFO, the largest firm that gives service to small and mid-size businesses, says the most common reasons for this seasonal collection decrease are:

  • The person who cuts the check or the check signer may be on vacation during the holiday or out due to illness

  • Accrual-based companies may be reluctant to pay year-end bills because they prefer to show cash on the balance sheet on December 31
  • The company staff may be more concerned with vacations and the holidays than collecting from customers.

Mr. Mills says there are still methods to invoke to improve the December cash flow. "As a business owner, you can still sit down with staff and create plans for cash collections. The staff may need to be reminded that they need to focus on the company's needs and be proactive in cash collections."

Suggested strategies to collect cash include:

  1. Collection Goals - Let the staff know the cash collection amount that they are expected to achieve in December. Be both firm and positive about this goal.

  2. Daily Reports - Have either the staff or a designated employee report daily collection results, as well as any concerns about the collection goal.
  3. Specific Customer Identification - Have a detailed report from the staff of cash collections expected from specific customers in order to meet the December 31 goal. Let the staff know any concerns about customers but also the need to maintain good customer relations.
  4. Internal Scheduling - Ask the staff for a calendar of the times they will be out of the office during the month and make sure someone is available to fill in and that the receptionist knows who can take calls or answer any customer concerns about invoices. Find out if any of the customers staff is unavailable during the month that might effect collections and plan accordingly.
  5. Performance Bonus - Consider giving a bonus to the staff for meeting or exceeding the cash collection goals. Extra money is a win situation for the company for having the cash to pay the bonus and for the employees to earn extra holiday money.

B2B CFO, founded in 1987, is the largest firm in the country that serves privately held companies with annual sales of up to $100,000,000, through its partners in all major US markets, in 45 major cities. The firm provides strategic finance and technology solutions to growth businesses and has as its firm motto: First direction, then velocity. Information is available at www.b2bcfo.com.

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