How Seasonal Businesses Can Better Manage Cash Flow ?

One of the primary challenges that seasonal businesses facing is managing cash flow — having enough money on hand to get ready for the busy season, making the most of the revenue generated in season, and having enough money on hand to pay bills in the off-season.

Cash Flow Management Tips for Seasonal Businesses

1. Keep a Calendar of Bills and Scheduled Payments

Keep a calendar of bills and scheduled payments to help you plan your expenses properly as you gear up for the busy season and ensure that you never fall behind on bills in the off-season.

Record all business transactions in a bookkeeping program in order to keeping track of revenue and expenses.

Regularly review your business bank statements to confirm all transactions and avoid unnecessary fees, like those for insufficient funds and overdrafts.

Prepare a schedule in advance, so you’ll be more likely to put enough money away while revenues are strong, and be ready for any dips in income.

2. Have a Full Understanding of Your Business’s Working Capital Cycle

Have a full understanding of your business’s working-capital cycle to optimize opportunities. For many seasonal businesses, this will look like inventory to accounts receivable, to cash, to accounts payable, to inventory.

i. Inventory: How much do you have? How much do you need in every order? How often do you order? Can you buy in bulk during the high season to save money? Wholesalers typically provide better price points for bulk purchases.

ii. Cash: Know how much cash you have at any given time. Most business owners rely only on bank account statements or current balances, but unpresented cheques can lead to significant miscalculations. It’s critical to track everything you spend and earn daily.

iii. Accounts payable: Negotiate with vendors to get longer terms and lower payments during the off-peak season and larger payments during the high season to help you optimize your cash-flow cycle, and be sure to make all payments on time and as negotiated to stay in good standing and avoid getting behind on bills.

iv. Accounts receivable: Invoice clients on time and collect regularly, and negotiate with your customers for faster payment terms to create a smaller working capital gap. If a client falls behind on payments, consider whether to continue doing business together, as small business owners are often lax about following up on late payments.

3. Look for Additional Revenue Streams During the Busy Seasons

Look for additional revenue streams to capitalize on during the busy seasons and use slower months for planning. It’s important to keep your core products and services as your main focus during your busy season, but keep an open mind for other revenue opportunities.

For example, a landscaping company will focus on consulting, installation, and maintenance on projects throughout the warmer months, but may also maintain a plant nursery that can remain operational for additional months throughout the year.

Before taking on an additional revenue stream, make sure that it fits in with your core operations and overall vision for your business, and won’t have a negative impact on your primary lines of business.

4. Secure a Loan or Line of Credit in Advance 

Prepare for off-season cash-flow crunches by securing a loan or line of credit in advance: Several months before you may need it, meet with your banker about obtaining a business loan or line of credit. Most banks will want to see your business plan when you apply for a business loan.

For some businesses, too, it may be advantageous to negotiate for interest-only payments during the slow times and full monthly payments (interest and principal) during the busy time. 

Loans and lines of credit can also be used strategically to fuel growth in your seasonal business. A loan with affordable monthly payments and reasonable terms can help you hire additional staff, buy more efficient equipment, or even refinance other higher-cost debt your business may have.

5. Budget and Forecast Properly 

Budgeting is critical for seasonal-business success, and effective cash-flow forecasting will keep you on top of your cash availability throughout the year.

6. Staff Appropriately 

Staffing appropriately during and between high seasons is essential, as insufficient staffing during your busy season can mean lost sales, and overstaffing during your low season can mean extra expenses that you don’t need and can’t afford.

Another option, if it fits your business, is to bring on employees on a commission-only basis, so that you’re paying less during your downtime.

Edited by: 浪子

Bibliography

Steven Cohen. (n.d). How Seasonal Businesses Can Better Manage Cash Flow. Retrieved from 
https://articles.bplans.com/seasonal-businesses-manage-cash-flow/