December is Collections Season
'Twas the month before year-end, with declining cash flow,
And the spreadsheets and ledgers were all in a row.
The accounts were all listed by the controller with care,
In hopes that the payments soon would be there.
The invoices were nestled, all neat in their tables,
With overdue statuses carefully labeled.
And I in my cubicle, with coffee in lap,
Had just braced my brain for a long fiscal recap.
When out in the hallway, there arose such a clatter,
I sprang from my chair to see what was the matter.
Away to the door, I flew like a bird,
Tore open the lock, and a strange noise I heard.
A little old driver, so lively and quick,
I knew in a moment it must be St. Nick.
This time he came not with toys I'm afraid.
He brought elves skilled in finance, an entire brigade.
In came those elves, with checklists and laptops,
And templates pre-loaded for financial workshops.
In matters of accounting they were simply the best,
And each elf was wearing a tiny fleece vest.
They started with the invoices, overdue and unpaid,
The elves tackled these in a furious cascade.
With calls and reminders, they worked with such speed,
Recovering dues was their mission indeed.
And lo! As they worked, the payments came through,
Each notification a cause for hullabaloo.
The cash flow improved, the accounts in the clear,
A/R declining to much holiday cheer!
Then they fired up Excel and began tapping with might,
Building projections late into the night.
"Bonuses for all!" they joyfully sing,
As they calculated what FY24 (projected) would bring.
Before those elves left they did the investor dispatches,
the budget, the audit, and even the taxes!
As the elves wrapped up their work, the checklists near done,
St. Nick looked around, the day had been won.
He turned to me, with a gleam in his eye,
Gave a wink and a nod, his departure was nigh.
He chuckled and smiled, "Oh, dear CFO,
Your payment woes, I certainly know.
Listen now well to my yuletide advice,
And your cash flow issues will melt like midsummer ice."
"First, streamline your invoices, make them clear and concise,
Ensure they're dispatched on-time, not once but twice.
A process so smooth, like a well-oiled sleigh,
Will bring in those payments without any delay."
"Next, consider your clients, both loyal and new,
If late payments are common, what action is due?
Don't shy from hard choices, with those who delay,
Sometimes parting ways, is the wiser play."
"And what of reliance on a single big client?
Diversification is key, be not compliant.
Expand your horizon, seek new business next year,
To reduce concentration risk and have nothing to fear."
With a wave of his hand he summoned his crew,
And like a flutter of birds up the chimney they flew.
Already en route to their next Christmas wonder,
Their sleigh disappeared with a rumble like thunder.
Leaving the office in peace, all tidy and bright,
With finances in order, and everything right.
I smiled to myself, with a sigh of relief,
Thanks to St. Nick and his team, we'd turn a new leaf.
Don't you wish you had a team of elves to wrap up the year for you?
For many businesses, December is not a time of joy, but a season of anxiety for making year-end numbers.
If you have outstanding invoices, the end of the year is a great excuse to reach out and ask your customers for payment.
Here's how to do that:
- Gather Your Data - Get a list of outstanding accounts and compile a table for each one, listing outstanding invoices, amounts due, and status ("Current / Overdue")
- Send an email - (template below!) let each customer know what they owe. The point here is to be friendly but firm. Explain that it's the end of the year, and you'd like to close outstanding invoices for accounting purposes. Clearly indicate outstanding amounts, and label overdue amounts as "Past Due." This email should ask the customer if they intend to pay, and when.
- Call - Big accounts should get a friendly phone call. Don't leave collections to chance. If a customer tells you they can't or won't pay by the end of the year, ask them to give you an estimated payment date, then follow up by email to recap and get it in writing, and hold them to it when the date approaches.
Next, consider how you got to this position:
- Are your invoicing and collection processes adequate to ensure you're getting paid regularly and on-time? You should be very intentional about these: your invoice process should be written down, documented with a Loom video, and assigned to someone who has direct responsibility to make sure invoices go out accurately and on-time, and that the collections process is functioning correctly. Even if the process is highly automated, you should have it clearly documented and mapped which will make improving it easier down the road.
- Do you need to cut loose your "dogs?" If a customer is habitually paying you late, you need to ask hard questions about their suitability as a client and find to put them on notice or gracefully part ways if they're more trouble than they're worth.
- Are you over-reliant on one customer? Often, we tolerate bad payment terms when we have no other choice. In this case, make it a strategic priority in 2024 to win new business and reduce your reliance on any one customer.
- Are your contract terms adequate to enforce payment? Consider adding late fees and early payment discounts for future contracts.
- Is your invoicing process supported with the right technology? As the main cash-producing engine of your business, your invoicing / collection process should be as automated as possible from beginning to end. Use software tools to make invoicing as regular and frictionless as possible both for you and for the customer.
Blackpowder Advisory is a fractional CFO service that helps busy founders and SMB owners to build highly automated financial systems scaled for growth.
Subscribe below to unlock my free email template for collecting overdue invoices from customers this December:
End of Year Collections Email Template: