Welcome to the Holiday Hangover!

The holidays—or as they are commonly referred to by credit managers—“Merry Late Payment” season, are officially over. A new year has begun and we are now nursing the holiday hangover. For those of you unfamiliar with the phrase, it describes the traditional plethora of excuses by customers who have the inability to pay their creditors on time.

We all have that customer who, for every job they sign a payment agreement on, swear on their mom’s 401k that they will pay on time. We both know we will not see that payment for another 90 days past its due date; there will be a few lien threats and several uncomfortable conversations before that payment graces our company. My personal favorite and a staple irritation to credit managers everywhere is the MIA customer. The one that drives the Mercedes, wears snakeskin boots and designer clothes, and takes the family on a well-earned holiday vacation with none other than our money! However, we will wait, right? Damn, our money went to more fun places than we did last year.

With the ringing in of 2024 and the motto “New Year, New Me” on everyone’s lips, hope springs eternal for a cure, or at least the cash flow version of “take two aspirin and call me in the morning.” We can change how long we “enjoy” the aftereffects with a few preventative measures to help avoid the seasonal deliriums and increase our cash flow, using three easy steps.

Know Your Customers

First, know the person with whom you are doing business. We all have that brother or wife’s old friend that we were stuck financing interest-free for months when it came time to pay. Use of commercial credit bureau reports, such as DNB, Creditsafe, Experian or NACM trade group reports, will not only show you who you are doing business with, but also how they operate financially. This includes how they pay other creditors, UCC filings, tax liens, suits or judgments and insight into their banking relationships. This tool allows you the ability to make an informed decision on whether to give them a $50,000 credit limit when the data clearly shows that they are more likely to be successful at a $10,000 limit.

Have a Payment Portal

Second, make it easy for your customers to pay you on time. Believe it or not, payment portals are the bread and butter of collections. You are giving your customers an easy way to pay you while they are out shopping, in the airport, or even if they are sunning in Bora Bora with their family. They provide an immediate and convenient way to pay you instead of waiting for USPS mail for two weeks or more. Payment portals even have set reminders so those customers who say they forgot all about the invoice they received 30 days ago can get a little nudge. It is a nice way of saying that their excuse of “I forgot” is invalid.

Know the Lien Laws

Lastly, know when to file a mechanics lien. This is not everyone’s favorite move, and I can see your faces from here. Nevertheless, remember that you need to protect your money. Every state is different. In some states, you have 90 days from the last time you were on the job, and in other states, you have 120. There are several ways to check the lien laws for the state where you are working. If you need help, reach out to a knowledgeable friend or lien service.

With these three easy steps, you will see a greater cash flow instead of your money taking Mr. Snakeskin’s family on vacation. Cheers to 2024, and may your holiday hangover be mild!