Factoring can help businesses avoid a Christmas cashflow crisis

10/11/2011

Whilst most people love Christmas it can also have a dark side for businesses, which in some cases can be crippled by a cashflow crisis.

Although Christmas can be a boom-time for retailers, businesses such as wholesalers, manufacturers and B2B firms can come close to the brink of collapse. Some businesses simply close down during and either side of Christmas. This means fewer sales and no one being available to pay invoices.

In addition, businesses who are busy in the run-up to Christmas may focus on sales and let the admin and accounts side of things slide, figuring they’ll pick things up when things are quiet over the holidays. This can be disastrous, though, because it means invoices are much more likely to be late. If invoices don’t go out until the new year, it could be well into February before they’re actually settled.

Experts advise keeping on top of this admin and being proactive about chasing debtors. Factoring can also be an option. Using factoring, businesses will get paid the bulk of their outstanding invoices straight away, regardless of their customers’ Christmas arrangements,

One factoring company told smh.com.au that factoring was a popular option to avoid a December cash flow disaster. He said, "Every year, we are busier in November and December. Part of the reason is that businesses are planning ahead.”