The time is fast approaching where you’re going to need to raid the piggy bank to spend a little extra on your seasonal campaigns.
You know this is going to be a great investment – the silly season provides all sorts of opportunities to increase sales, win back old customers and secure brand new ones that you can hopefully carry with you into the New Year.
However, coming up with the cash in the first instance to fund all your additional efforts isn’t necessarily as straight forward as you’d perhaps like it to be.
You’re going to need to invest in a landing page campaign, increase your advertising – especially around Black Friday and Cyber Monday – place greater focus on targeting and retargeting, and probably fork out to pay your staff for a little overtime as your work load increases.
If you’ve got a good strategy, you can be pretty certain (as far as business forecasts go) that your investments will pay off – but if you can’t fund them in the first place, then you may have to concede that you and your customers might not actually get what they want for Christmas this year.
The cash flow struggle of the SME – a global problem
SMEs notoriously struggle with cash flow. One of the greatest and persisting problems that they face – and there’s every likelihood that you’ll know exactly what I’m talking about – is the unremitting culture of late payments that can be nothing short of crippling for many small businesses.
Here are some worrying key facts from invoice financing company MarketInvoice:
(Image source: MarketInvoice)
Late payments are becoming a big problem. Earlier this year, a report from This Is Money found that an increasing amount of small firms in the UK were having to turn to the courts to chase late payments, with the average amount being owed standing at £4,619.
“Almost £5,000 is a significant amount for any small business to have to go to court to chase and it is hugely unfair that a small business should have to spend its precious time and resources on chasing payment for work that has already been delivered,” said Martin Campbell of Ormsby Street.
“Late invoice payment is fast becoming the scourge of small business in the UK, causing cash-flow issues that can impact growth and even the very existence of a business,” he added.
It’s the same story the world over.
How to secure funds for your seasonal campaigns (and beyond)
Late payments are a real bane for SMEs, which by their very nature often have to run on tight margins even at the best of times. When clients start delaying payments, all sorts of problems begin to ensue – they can’t pay their office rents, their software subscriptions, even their staff, let alone think about investing in marketing campaigns for Christmas.
So what can be done? How can you improve the cash flow of your small business, reduce your debts, free up some much needed funds to launch the campaigns you want, and begin to secure some accessible capital that will see you right far beyond the festivities and into 2017?
Chase late payments
This is first and foremost.
Since the majority of SME cash flow struggles are caused by late payments, then it’s time to start biting the bullet and be a little more hard-nosed in your efforts to chase them up.
I make this point because some studies have shown that SMEs – alarmingly – are writing off debts that they’re owed for no other reason than being simply too embarrassed to pursue them. The study of UK small businesses carried out by automated credit control service Satago found that despite the fact the country’s SMEs are collectively owed billions of pounds in late payments, 34% said that they write off thousands every year. Of these, 81% cited that they found the process of chasing late payments “uncomfortable”, and 19% were afraid of antagonising customers.
As troubling and ‘uncomfortable’ as chasing late payments may be, in the world of business, your debts have to come first if you want to fund campaigns, growth and just simply stay competitive in your industry. You must chase all debts that are owed to you, especially if you’re struggling to pay your own. Take the debtors to court, if necessary, though often the mere threat of legal action will be enough to see some movement.
There’re a number of software solutions that can help you chase payments, but the one that’s been catching my eye recently is indeed Satago, which was responsible for carrying out the study quoted above.
The solution integrates with your existing accounting and invoicing software and automates the process of chasing up your debtors from one user-friendly dashboard. The free version is also very generous – up to 5,000 of your invoices can be chased a month, with risk reporting and access for up to 10 users all built in.
Like MarketInvoice, Satago also offers invoice financing, which I’ll cover in a little more detail below.
Even if you manage to reclaim all of your late payments, you may still find that you need a little cash injection from time to time – especially if you’ve got a big Christmas campaign to fund – to achieve the results you’re after.
This is ok. Businesses need finance, and sometimes that will mean taking on a little debt to secure your investments in the future.
There’re different types of debt financing that are available to all businesses. These include: loans from banks, credit unions and alternative lenders; credit cards and overdrafts; trade credit; factoring – also known as invoice financing.
If you really are struggling with late payments, then invoice financing might very well be the quick solution to unlock some much needed funds to help you through the Christmas season.
Essentially, factoring involves selling your unpaid invoices to a third party at a discount in exchange for cash up front, and the factoring company then collects payment from your clients and customers.
It’s a good and efficient solution. However, you must be aware that if the customer eventually fails to make payment, then you will still have to pay back the loan you took from the factoring company – and some quite serious interest can be charged on top of this. So, although I’m essentially advocating this line of finance, you must be aware of the risks involved.
Over to you
If you’re struggling to find the funds to finance all your big plans for some great Christmas campaigns, then you may take some solace in learning that you’re by no means alone. However, this doesn’t solve the problem.
What will solve the problem is taking action today. Start by chasing up those debts that are owed to you – they may well amount to provide you with enough capital to furnish all of your plans, even if you resort to invoice financing where you may well have to sacrifice a small percentage of what you’re owed in exchange for immediate funds.
Either way, make sure you’ve got a strong strategy mapped out for some serious sales over the Christmas period, and, if your projections justify it, consider some of your debt financing options – if it’s an investment worth making, then make it. But, as always, ensure that you perform some due diligence on what you can afford, and never take on debt if you can’t carry the risk.
What funding solutions have you found most effective – or not! – for your small business? Please let me know in the comments section below. I’d like to know more about your experience.