Fearing February

It’s the sort of thing that makes entrepreneurs wake in fright – the dreaded month of February.

For many businesses, the start of the year is the very worst time for cashflow. Because of the interruption caused by Christmas and the summer holidays, invoices sent out in late December often don’t get paid until late January or even early February.

In many cases, the January invoices are late going out too, which means more cashflow delays.

It’s seasonal of course, and something that can and should be planned for. But that doesn’t make it any easier and it’s no surprise that the biggest months for business collapses are generally February, March and April.

New research from Dun & Bradstreet suggests that despite the recovering economy, cashflow will remain just as big a problem for most SMEs.

D&B’s latest research into average payment terms shows that while the average payment term fell from 53.2 days to 52.1 days in the December quarter of 2010, the number of businesses with unpaid bills more than 90 days old has increased by 7% in the last 12 months.

That’s an ugly statistic – those sort of long-term debts suggest these companies have some big problems, which again underlines that this is a very uneven recovery.

If you are not on top of your cashflow right now, these statistics should spark you into action.

During these lean months, cashflow needs to be a priority of everyone from management down. Invoices need to be chased immediately (preferably, reminders should be sent before a bill comes overdue) and managers need to be aware of their debt-chasing options, such as legal action and collection agencies.

While growth is high on the agenda for many businesses, this is certainly not the time to take your eyes of the basics.