Hey there,
We've made it to Q4. This year has flown by, and your thirteen week forecast now lands in… checks notes 2027.
In today's edition we're looking at the final quarter of the year, how your customers are likely to behave, and what you can do now to plan for it. We know you're busy chasing year-end numbers, so let's get into it.
The short version: your invoice says when you're owed, but your customer's calendar decides when you actually get paid, and that calendar changes considerably between now and January.
You may sell more and collect less. Many companies spend their remaining budget before the year closes, which can make November and December strong months for sales. The cash, however, arrives on your payment terms, not on the sale date. A net 30 invoice sent on December 10th is due January 9th, and that assumes the customer pays on time. Beware, a strong December can show up as a thin January.
Your customer's AP team will be short-staffed. Between Thanksgiving and New Year's, the people who approve and release payments take time off, close their books early (or late), and run fewer payment batches. Many AP departments run on manual approvals even in a normal month, so fewer people means a longer queue. An invoice that misses a customer's last payment run of the year does not get paid a few days late… try a month late.
Some customers delay payments deliberately. Larger companies in particular want a strong cash balance on December 31st, and one way to get there is to postpone vendor payments for the last few weeks of the year. Accountants have a name for this: window dressing. It isn't personal, but it does mean your invoice could be one of the ones that waits.
The banks close too. Christmas and New Year's both fall on a Friday this year. The Federal Reserve's ACH network stops processing at 11:30 p.m. on Christmas Eve and does not resume until the evening of Sunday, December 27th. If Friday is your payday, payroll needs to land Thursday, so check your provider's cutoff and submit early that week or your team will be paid on Monday. The same applies on New Year's Day. I know it’s only October, but December sneaks up!
Don’t get me wrong, this does not make Q4 a bad quarter. The cash from a good one simply arrives late, and the businesses that feel the squeeze in January are usually the ones that had a strong December and planned as if it were any other month.
Try this week: Waiting on big payments from customers? Reach out to your largest ones and ask whether they expect any abnormalities this quarter, like holiday closures, an early year-end close, a final payment run in mid-December, or a change in who approves invoices. Then flip it around. If vendors are waiting on payments from you, make sure you know your abnormalities this quarter too: when your own office closes, when your last bill run of the year happens, and which paydays move because of the Friday holidays. Telling your key vendors now heads off disruption in December, and it's a lot easier than explaining a late payment after the fact.
The number: 5. That's how many of the Federal Reserve's 11 bank holidays fall within the next 13 weeks: Columbus Day (10/12), Veterans Day (11/11), Thanksgiving (11/26), Christmas (12/25), and New Year's Day (1/1) (Federal Reserve Financial Services holiday schedule). Nearly half of the year's bank holidays, concentrated in a single quarter. Plan accordingly.
What's new at Arclite: Track your variance. One of the most important questions in strategic finance is a simple one: why?
Why didn't that payment land last week? Why did our runway change? Why is our bank balance a bit lower than expected?
Arclite now tracks your historical cash performance against your previous forecasts, so you can see where reality and the forecast split, understand the why behind each gap, and improve on all of them. Try it today.
Until next time,
Christian