Imagine this happens in mid December.
Your team has finished the project.
The client is happy.
The invoice has been sent.
Everyone agrees the money is owed.
Then the email comes back:
“Our accounts team has closed for Christmas. Payments resume in January.”
For a professional, technical or service business in Hobart TAS, that can turn completed work into a surprisingly long wait for cash.
Nothing is wrong with the project.
The client has not disputed the invoice.
The business has earned the revenue.
But wages, rent, software, suppliers and finance commitments do not stop simply because the customer’s payment process has paused.
That is not a problem to discover in December.
On 27 September, businesses already booking work for October, November and December can start identifying which invoices are likely to cross the Christmas and New Year period.
The job can be finished before the cashflow cycle is finished
Professional and service businesses often have a different working capital problem from retailers or wholesalers.
There may be very little stock.
There may be no warehouse.
There may not be a large supplier order.
Instead, the largest cost is often people.
Employees work on the project.
They are paid weekly or fortnightly.
Software subscriptions continue.
Premises costs continue.
Contractors may invoice.
The project reaches completion.
Then the client is invoiced.
If the customer has 30 day terms, the business still has another month to wait.
If that invoice lands close to Christmas, the waiting period can stretch into January.
The work may be complete while the business is still carrying most of the cost.
Look at the projects already likely to run into December
Late September is early enough to do something very simple.
Look at the current project calendar.
Which assignments are expected to finish in November?
Which will run into December?
Which clients require approval before an invoice can be issued?
Which clients normally pay at month end?
Which have centralised accounts teams?
Which tend to take longer than the stated terms?
That can reveal where Christmas cashflow exposure is likely to occur.
A project finishing on 5 December is very different from one finishing on 20 December.
The value of the work may be identical.
The timing of the cash may not be.
A 30 day invoice issued in December is probably not December cash
This sounds obvious when written down.
It is still easy to overlook when planning revenue.
An invoice issued on 6 December with 30 day terms is January money.
The business may report the sale in December.
It may have completed all the work in December.
But the bank account may not see the money until the new year.
That distinction matters when payroll continues through the same period.
If several large invoices are raised in December, a business can finish the year with strong revenue and a much larger debtor balance than usual.
The dangerous assumption is “they normally pay quickly”
Some customers do.
But Christmas introduces another variable.
The person approving the invoice may take leave.
The accounts team may run fewer payment batches.
The client may close entirely for part of the period.
An invoice might miss the final payment run before Christmas and sit until staff return.
That does not automatically make the customer a poor payer.
It can simply be the way their business operates.
The useful question is not whether the customer is usually reliable.
It is:
When is their final payment run before Christmas, and what has to happen for our invoice to make it into that run?
Find out how the customer actually processes invoices
This can be worth asking well before December.
Does the client need a purchase order?
Does a manager need to approve the work?
Are timesheets required?
Does a completion report need to be supplied?
Are invoices processed centrally?
Is there a cut-off date for December payments?
If the invoice cannot enter the payment system until all the supporting information is supplied, a small administrative delay can push the payment into another cycle.
For a $4,000 invoice, that may not matter much.
For a $90,000 project, it can change the business’s January cash position significantly.
Professional businesses can carry months of labour inside one invoice
Consider a consulting or technical services business with a project running from October through December.
The team works on it for ten weeks.
Employees are paid throughout those ten weeks.
The business may also pay contractors, software costs and other project expenses.
If the client is invoiced only when the work is complete, the business has funded almost the entire delivery period itself.
Then the payment terms begin.
This is why project profitability alone does not tell the business how much working capital it needs.
A project can have an excellent margin and still require a large amount of cash to carry it from commencement to payment.
Milestone billing can make a major difference
Where the nature of the work allows it, one large invoice at completion is not always the only way to structure a project.
A business may be able to use:
an initial deposit
monthly billing
milestone invoices
staged payments
progress claims
payment for significant third party costs as they arise
Whether that is commercially appropriate depends on the client and the work.
But the principle is important.
If a three month project is being delivered, the business should consider whether it needs to finance the client for the entire three months as well.
A $120,000 project can have very different cashflow depending on how it is billed
Take the same $120,000 project.
Under one arrangement, the entire amount is invoiced on completion.
Under another, the business invoices $30,000 at commencement, $30,000 at an agreed milestone and the balance on completion.
The total revenue has not changed.
The project margin has not changed.
The timing of the cash has.
That timing can determine whether the business funds months of payroll itself or receives customer money throughout delivery.
Cashflow can sometimes be improved without changing the price or taking on additional finance.
Waiting until December to discuss billing may be too late
Once a contract has been signed and work is almost complete, changing payment arrangements can be difficult.
That is why September and October matter.
If new projects are being quoted now and are likely to run into December, payment timing can be considered before the engagement is finalised.
The conversation might simply be:
“When will the milestones occur?”
“When can we invoice?”
“What are your payment terms?”
“Does your organisation have a Christmas payment cut-off?”
Those are commercial questions, not signs that the business is struggling.
Payroll keeps moving even when clients are on leave
The largest Christmas cashflow expense for many service businesses may be payroll.
Employees may receive:
ordinary wages
annual leave
public holiday entitlements
other employment related payments
The business may also have employees taking leave while customer receipts slow.
That creates an unusual combination.
Less work may be happening on certain days, but substantial cash can still be leaving the business.
A business expecting several large customer invoices to remain outstanding over Christmas should consider whether existing cash reserves comfortably cover those payroll obligations.
Contractors may create another timing mismatch
Some professional businesses use contractors for specialist work.
The contractor might expect payment within seven or 14 days.
The end client might pay in 30 days or more.
If several contractors are involved in a project, the business can pay a substantial amount before recovering that cost from the client.
This becomes more important as projects grow.
A subcontractor bill due on 15 December does not become easier to pay because the end customer intends to settle in January.
The business carries the difference.
The debtor ledger can quietly become the biggest asset you cannot spend
By the end of a strong December, a service business may have a large amount of money sitting in accounts receivable.
The invoices are valid.
The customers are good.
The revenue has been earned.
But unpaid invoices cannot fund this week’s payroll.
This is why businesses should look beyond the profit and loss statement.
If revenue is increasing but the debtor ledger is increasing even faster, the business may need more working capital simply to support the higher level of trading.
December debtor concentration deserves attention
Imagine the business has $250,000 outstanding at Christmas.
That may be manageable if it is spread across 40 reliable customers.
It can feel very different if $170,000 is owed by two clients whose offices are closed until mid January.
Customer concentration is not only a credit risk issue.
It can also be a timing issue.
If a small number of customers control most of the expected January receipts, the business should understand what happens if one payment arrives later than expected.
Do not build January around the earliest possible payment date
Optimistic cashflow forecasts often assume every customer pays exactly when expected.
A better January forecast might include some breathing room.
What happens if the major invoice expected on 8 January arrives on 15 January?
What if an approver does not return from leave until the second week of January?
What if a query needs to be resolved first?
The business does not need to assume the worst.
It should simply avoid creating a plan that only works if every large payment lands on the perfect day.
Debtor finance may be relevant once eligible invoices exist
For some B2B businesses, the cashflow issue begins after the work has been completed and qualifying commercial invoices have been issued.
Depending on the business, customers, invoices and lender, debtor or invoice finance may be worth considering.
A facility may allow earlier access to part of the value of eligible receivables rather than waiting for the customer’s normal payment cycle.
Lenders may consider factors such as:
the debtor ledger
customer quality
invoice age
payment history
debtor concentration
disputes or credits
the underlying work or transaction
Not every invoice or business will qualify.
But where substantial working capital is repeatedly tied up in commercial debtors, it can be worth investigating.
Finance cannot fix an invoice that has not been raised
There is an important distinction.
If a project is still underway and the business cannot yet invoice the customer, there may not be a receivable available for debtor finance.
The business may still be funding:
payroll,
contractors,
software,
suppliers,
travel,
and other project costs.
That earlier part of the cycle may require existing cash, customer deposits, staged billing, an overdraft, line of credit or another working capital structure depending on the circumstances.
This is why the timeline matters.
The funding requirement can change as the project progresses.
A business loan should not be the automatic answer
When cashflow becomes tight, the temptation is to ask:
“How much can we borrow?”
A better starting point is:
Why is the cash short, and for how long?
If the business is carrying profitable work for six weeks until customers pay, that is a particular type of problem.
If it is continually borrowing to cover operating losses, that is a very different problem.
Understanding the cause helps determine whether finance is appropriate and what type of structure should even be considered.
Existing cash may be enough, provided it is genuinely available
Some Hobart businesses will not need additional finance at all.
They may have sufficient reserves.
But calculate those reserves carefully.
The bank balance may include money that is effectively needed for:
GST
PAYG
superannuation
annual leave
rent
existing supplier commitments
finance repayments
What remains after those obligations is a more useful picture of available working capital.
January can be expensive before normal invoicing resumes
The new year does not necessarily begin with a rush of customer cash.
Employees return.
Payroll resumes.
Projects restart.
Contractors send invoices.
Software and premises expenses continue.
New work may begin before December debtors have all been collected.
A professional business can therefore be funding January activity while still waiting to be paid for work completed before Christmas.
That overlap is worth identifying now.
One late payment should not decide whether payroll clears
This is a useful stress test.
Look at the largest invoice expected around Christmas.
Remove it from the expected payment date.
Move it two weeks later.
Does the business still operate comfortably?
If yes, there is some resilience in the forecast.
If moving one payment by ten business days creates an immediate problem, the business has identified a concentration worth addressing before December.
That might involve changing billing, retaining more cash or considering an appropriate working capital facility.
What should a business review now?
Not every business needs a complex financial model.
Start with the major items.
List the larger projects expected between October and December.
Add the invoice date.
Add the customer’s real payment behaviour.
Then add the significant cash commitments between now and when those invoices are expected to clear.
The gap becomes much easier to see.
For businesses considering finance, useful supporting information may include business bank statements, management accounts or financial statements, debtor and creditor ledgers, contracts, project schedules, customer payment terms, payroll requirements, existing finance commitments, the ATO position and the amount and purpose of any proposed funding.
Lender requirements vary.
Five questions Hobart businesses should answer before December invoices are raised
Should we ask clients now about their Christmas payment cut-off?
For material invoices, it can be useful to understand when the client’s final payment runs occur and what documentation must be submitted for the invoice to be processed.
Can we invoice projects in stages instead of waiting until completion?
Possibly. It depends on the contract, customer and nature of the work. Where commercially appropriate, staged billing can reduce the amount of work the business funds itself.
Can debtor finance help with invoices that will not be paid until January?
Potentially, where the business and qualifying B2B invoices meet the lender’s requirements.
What if the project is still underway and we cannot invoice yet?
The business may need to consider its own cash reserves, deposits, progress billing, existing facilities or other working capital options until an invoice can be raised.
Is September too early to think about January cashflow?
No. If work being quoted or delivered now is likely to produce invoices in November or December, the timing of those payments can already influence January.
Christmas cashflow is not always about Christmas sales
For Hobart’s professional, technical and service businesses, the end-of-year issue may have very little to do with selling more Christmas stock.
It can be much simpler.
The business does the work.
It pays the people who did the work.
It invoices the customer.
Then Christmas arrives before the customer’s cash does.
Thrive Broking can help businesses examine that timing and compare relevant working capital, debtor finance, asset finance and other commercial funding options across our lender panel where appropriate.
The useful work in September is identifying which future invoices are most likely to become January cash and making sure the business can comfortably carry the period in between.
A Broker’s Observation
If a business tells me it expects a strong December, I would want to know whether it means strong December sales or strong December cash receipts.
They are not necessarily the same thing.
For a professional or project based business, December may be the month when a lot of work is completed and a lot of invoices are raised.
January may be when the money actually arrives.
I would put those two months beside each other and look at payroll, contractors, tax, existing commitments and the largest customer payments.
The project is not financially finished when the work is finished.
It is finished when the cash cycle closes.