Your Business Credit

How can my small business overcome seasonal cash-flow issues?

Invoicing your clients sooner and putting money aside for summer expenses can help you improve your seasonal cash flow


If cash flow gets tight over the summer, there are steps you can take to ensure your clients get paid sooner and you don’t have to rely heavily on plastic to cover expenses.

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Dear Your Business Credit,

I run a small content marketing agency. Every summer the same thing happens: I end up in a cash flow crunch.

It’s not because I’m working less. Clients go on vacation and delay paying me, or they delegate to others on the team who lose my invoices.

I end up having to put a lot of charges on my business credit card. I’m in the middle of this situation again and want to prevent it going forward. Any advice? – Michelle

Dear Michelle,

This is a common problem for small businesses. It may not be possible to change clients’ behavior, but you can change your own.

The first step is to make sure your invoices are going out immediately upon finishing projects.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: Should I use next-day deposit to improve my cash flow?

Ways to get paid by clients sooner

Many businesses operate on a 30-day payment cycle and the clock doesn’t start ticking until you send the invoice. Many big companies take even longer. It’s not uncommon for them to take 60 days to 90 days to pay.

Often, these companies have automated their payments to contractors and freelancers. And in order to get paid more quickly, you typically have to offer them a discount through their invoicing platforms. Those discounts can add up on big projects.

Also, make sure you ask clients who don’t send automated acknowledgments to confirm they have received your invoices. A simple note saying, “Just wanted to make sure my invoice came through,” can go a long way.

You don’t want to discover a client never received an invoice when the payment does not come on schedule. Bear in mind that clients may think to expedite a payment if the original invoice got lost, so make sure to ask them to do this.

How to overcome the summer lull

Even if you do these things, clients may still pay you late. Since this is a predictable pattern in your business, it’s time to take a look at your past bookkeeping records and figure out what your revenue and expenses typically are over the summer, and how much of a gap usually exists.

Look at your credit card statements for the summer months to see what you’re having to put on a credit card.

Try to put aside that amount of money over the course of the year so you have cash reserves to cover the shortfall. That way you won’t have to put as many charges on your business credit card.

See related: Best business credit cards

Try the ’10 percent’ rule

Going forward, I’d also use a “bottom 10 percent” rule with your clients.

Look at the time they take to pay you on average. Focus on doing less work with the 10 percent who take the longest to pay and doing more with those who pay you in 30 days or less.

As small business owners, we tend to want to please our clients, but if a client is paying you late, he or she may be taking advantage of your empathetic nature.

Do you really need that kind of business – or would you be better of doing more business with those who truly appreciate and prioritize you?

You already know the answer to that question. Good luck. With advance planning, the summer of 2020 should be much easier for you financially.

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