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COVID-19, Summer Vacations, and Cash Flow

30 April 2020


Spring has sprung in North America. While we may be stuck inside our houses under quarantine, we can’t wait to get outside and enjoy a real vacation. The local RV shops and camping stores will be swinging into gear for the upcoming spring and summer vacation season.

Not to mention, your accounts receivable staff are counting the days until they can book time off and enjoy the great outdoors. They have likely put a significant amount of time, energy, and resources into the planning of their vacations, and deserve some well-earned rest.


Has anyone put the same effort planning your A/R?

Vacation season, if not planned for, can have a “double-whammy” effect on your business. Customers’ accounts payable are on vacation, and so are your accounts receivable employees. Some thoughtful preparation now will ensure your company can easily weather the vacation months ahead.

We recommend implementing the following steps to minimize the effects of vacations on your cash flow:

1) Host a team meeting to discuss potential cash disruption

2) Establish and stick to terms and conditions of credit policy

3) Automate payment process

4) Consider outsourcing A/R function


Team Meeting

The team meeting is the most crucial of the four steps mentioned above. It brings the potential cash crunch to the forefront of people’s minds. Explain the seasonal concern and solicit ideas from your people to help mitigate the usual summer doldrums. Each industry is different, and your personnel will likely come up with some unique suggestions above the four we recommend that will best suit your business. Getting staff involved to develop solutions to problems increases ownership and generally leads to positive outcomes.


Stick to Credit Policy

If you are extending credit terms to your clients, it is highly likely that they have signed a credit application. Now is the time to remind customers of the written agreement and the benefits of paying on time. Perhaps share this blog with your clients so they can, in turn, implement the same steps to speed up their cash flow and yours.


Automate Payment Process

There are two components to consider. First, if your customer has the capability of paying you by an Electronic Funds Transfer (EFT), we suggest signing up for this option. Your money comes in faster and automatically reaches your bank account instead of a cheque lying on a vacationing employee’s desk.

Secondly, If your bank’s cash management permits, you can offer an auto-debit option to your customers where you would automatically withdraw funds from their accounts.


Outsourcing the Receivable Function

Vacation periods can leave your bench strength somewhat diminished. So, too, can parental leave, pandemics, and a host of other life issues. Outsourcing accounts receivable management to a trusted supplier can provide peace of mind knowing that part of your business is well-managed, and your cash will continue to flow.


In conclusion, when managing your receivable – just like in sports – the best offense is a good defense. Make preparations now as we emerge from this pandemic, and perhaps staffing levels are low, to ensure you take all precautions necessary to safeguard your cash flow as we head into the summer months. Options include hiring temporary staff, automating the receivables management processes, hiring a credit “swat team” to get your aging back on track, and investing in training for your credit team.

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