Handling payment processing challenges is tough for any business. As the year winds down, these challenges can become even more complicated.
With Christmas bonuses, early payroll demands, and holiday closures, the pressure is on for accountants, bookkeepers, and payroll teams to keep payments on track.
These seasonal pressures affect cash flow, and while revenue and profit are undoubtedly important, it’s cash flow that fuels the day-to-day operations and keeps businesses stable.
Dan Daly, Partner, RDA Accountants
"Payroll has long been perceived as a low-complexity, low-value service delivered at high volume. But the reality is quite different—it’s a highly technical and sensitive process, where even minor errors can have a massive impact, especially as payroll is about ensuring people are paid accurately and on time."
End-of-year payroll and payments bring unique hurdles for small businesses, from limited processing days to increased payment volume.
During this critical time, effective cash flow management can make all the difference in ensuring businesses can keep operations running smoothly into the new year.
In this article, explore the top three payment challenges businesses face during the Christmas period and how to address them to stay in control and on schedule.
1. Limited processing days and payment delays
One of the biggest challenges for businesses during the festive season is the sheer number of bank holidays, which can disrupt the regular flow of payments. In 2024, the Bacs payment system will be unavailable for a total of seven days: December 23-26 and December 30-January 1. With fewer processing days and the usual three-day Bacs clearing cycle, many businesses risk delays in payroll and supplier payments, resulting in strained cash flow at a critical time.
Faye Meakin, Accounting Bookkeeper, Berry Business Management
"For payroll agents, the main challenge is the reduced number of processing days. Processing payroll 10–11 days earlier to meet early December pay dates often clashes with other deadlines, like VAT and CIS. While HMRC doesn’t require adjustments for early payments, the condensed timeline adds significant pressure."
Solution: Leveraging real-time payment systems such as integrated Faster Payments integration can be a game-changer for businesses. Unlike the traditional Bacs cycle, Modulr’s system, for example, enables payments to be processed in just 90 seconds, ensuring you can pay employees and suppliers 24/7—even on bank holidays. Automated reminders for clients can also help maintain cash flow by encouraging timely payments and reducing overdue accounts during the festive season.
2. Manual reconciliation complications
The end-of-year rush means an increased volume of invoices, payroll adjustments for early paydays, and often bonuses—all of which can make manual reconciliation even more time-consuming.
Checking and matching payments to invoices by hand leaves plenty of room for error, especially as the workload builds up. This can result in delayed payments, cash flow discrepancies, and more stress on your accounting team.
Solution: Simplify your payment reconciliation by using accounting software with embedded payment capabilities and automated reconciliations. Solutions like Brightpay, Sage and Xero, integrated with Modulr, automatically match payments to invoices in real time, giving you accurate and up-to-date cash flow visibility. This automation drastically reduces the risk of errors, keeps your cash flow on track, and eliminates the need for tedious manual reconciliation, so you can focus on finishing the year strong.
3. Demand for payment flexibility among employees
During the festive season, many businesses choose to release payroll early to accommodate employees’ Christmas expenses. This can be beneficial for staff but challenging for cash flow management, as it requires businesses to handle payments earlier than usual, potentially resulting in cash flow strain. Additionally, seasonal payments such as bonuses can add to this complexity, requiring precise and timely disbursement.
Faye Meakin, Accounting Bookkeeper, Berry Business Management
"One of the biggest challenges for employers during the festive season is the expectation to pay employees earlier than usual—often by the 20th instead of the 31st. While the January pay period stretches to accommodate, it still means paying out 11 days earlier than planned, which can strain cash flow. For payroll agents, the main challenge is the reduced number of processing days. Processing payroll 10–11 days earlier to meet early December pay dates often clashes with other deadlines, like VAT and CIS."
Solution: By using an integrated payment platform with real-time capabilities, businesses can meet early payroll demands without causing cash flow issues. Modulr’s direct access to the Faster Payments Scheme allows businesses to release payments on any day, even bank holidays, ensuring staff get their wages on time without placing extra stress on accounting teams. With flexible scheduling options, you can also easily plan for bonuses, reimbursements, or ad-hoc payments to keep everything on track.
Final advice
The festive season doesn’t have to mean extra hassle and complexity for your payroll and accounting processes. By identifying these top challenges—limited processing days, manual reconciliation, and demand for payment flexibility—you can take proactive steps to streamline end-of-year payments.
Dan Daly, Partner, RDA Accountants
"The golden rule for managing end-of-year payroll is preparation. A detailed payroll calendar—planned well in advance—ensures all stakeholders know the revised deadlines, the information required, and the adjusted pay dates. Clear communication and proactive planning can make all the difference in navigating this critical period."
Remember to communicate clearly with clients, employees, and stakeholders about what the end of year payment run looks like so they can prepare and know what to expect.
With solutions like Modulr, you gain access to real-time, flexible payment options that remove the need for checking the Bacs processing calendar and ensure smooth payroll and supplier payments. Not only does this ease the workload for accountants and bookkeepers, but it also allows businesses to keep cash flow steady through one of the most critical times of the year.
Managing cash flow over the festive season can be straightforward with the right tools in place. Equip your business with the solutions that allow you to focus on closing out the year strong and starting the next on a solid footing.
By automating processes and enabling 24/7 payment capabilities, Modulr makes it possible to bring calm and control to the end-of-year rush.
