Managing the expected rise in late payments in Q4

The holiday season is a time of joy and increased sales for businesses. However, it’s also a season that can bring about a rise in late payments and higher Days Sales Outstanding (DSO). With consumer over-indebtedness under the microscope in 2023, it’s crucial for business owners to prepare for these challenges.

The double-edged sword of rising consumer spending

Based on a 2023 holiday spending report by PwC, it’s anticipated that consumer expenditure will rise by a robust 7% this year, with an average allocation of $1,530 on presents, travel, and leisure activities. Expenditure on travel is predicted to see a 12% uptick compared to the 2022 holiday season, as nearly two-fifths of shoppers are projected to exceed their spending from the previous year.

At the same time, recent studies and recently passed EU legislation improving how consumers are informed about taking on credit, indicate that late payments are a growing concern. This makes it even more essential for businesses to have strategies in place to mitigate the impact

Natural effect on the ability to pay bills on time

The danger of failing to pay a bill climbs exponentially as spending increases. The previously noted urge to make the most of summers might result in missing payments for even basic services such as rent, utilities, or similar, causing other, not-as-fundamental companies to weigh the risks as well.

The risk of missing payments grows with increased spending. Overspending can lead to a domino effect, where one missed payment triggers others. Consequently, pressuring customers to pay a debt doesn’t seem like the right approach.

The seasonal surge and its pitfalls

Seasonal events like Halloween, Black Friday, Christmas, and local celebrations such as Sinterklaas in the Netherlands often lead to a boost in consumer spending. While this is great for business revenue, it can also create a backlog of late payments as people juggle their holiday expenses. With options like credit and “Buy Now, Pay Later” readily available, consumers sometimes stretch their finances too thin, putting both themselves and your business at risk. Therefore, it’s important to have strategies in place to manage the potential downsides of the upcoming holiday season.

Proactive measures for a stress-free holiday season

The following are strategies that can help you prepare for the potential surge in late payments this holiday season.

1 – Offer early payment incentives
Encourage your customers to settle their invoices ahead of time by offering early-bird discounts or exclusive perks. This not only boosts your cash flow but also fosters a sense of loyalty among your customer base. It’s a win-win situation that can help you navigate the holiday rush with ease.

2 – Leverage automated follow-up systems
Automated reminders can be a lifesaver when it comes to collecting payments. Utilize multilingual click & pay reminders through various channels like interactive videos, HD Voice, or SMS. QR-code payment links can also be generated for your letters. These features not only nudge your customers towards settling their debts but also make the entire process more efficient and cost-effective. Services like Alphacomm’s Collectmaxx offer these capabilities.

Recommended reading: Collectmaxx – Mass Payment Made Personal

3 – Provide flexible payment plans
Given the economic uncertainties of 2023, offering flexible payment plans can be a game-changer. This allows your customers to manage their finances better while ensuring that you still get paid. It’s a compassionate approach that can yield positive results in the long run.

4 – Monitor your DSO like a hawk
Keep a vigilant eye on your DSO metric. Any sudden spikes should be treated as red flags, prompting immediate action. Utilize analytics tools to keep track of payment patterns and identify potential issues before they escalate.

Wrapping it up!

As the holiday season approaches, it’s crucial to be prepared for the challenges that come with increased consumer spending. By implementing these strategies, you can ensure that your business remains financially healthy while providing excellent service to your customers.

Don’t let late payments dampen your holiday spirit. Contact us today to learn how the Collectmaxx payment reminders solution can help you manage your cash flow effectively. Get in touch now!