SMEs should consider factoring to help with Christmas and New Year cash flow

12/11/2009

The Christmas and New Year period is one of the toughest times of year for small businesses in terms of cash flow. However, help in the form of invoice factoring can generate much-needed cash while small businesses wait for their New Year invoices to be paid.

Because so many staff, including accounts staff and directors, take time off during the festive period, cheques are often left sitting around with no one to sign them off. As a result, some small firms are left with no money coming in for weeks.

Invoice factoring is, in effect, a cash advance on invoices raised and can help ease a company through the transitional period to the New Year. This can be especially necessary with more sick days taken over the Christmas period, costing small firms yet more money.

Without factoring, small business owners often start to rely on expensive overdrafts or company credit cards to see them through until the New Year, which just causes more finance problems for the business down the line.

Commercial finance experts claim that the festive cash flow problem is getting worse each year and that it is partly responsible for the number of small firms that collapse each year.