9 Ways to Manage Cash Flow in a Seasonal Business

cash flow

Does your small business make most of its sales during the winter months? Or perhaps you rely on summer tourists for your income. When you run a seasonal business, maintaining sufficient cash flow can present a challenge.

9 Ways to Keep Your Cash Flow Under Control

  1. Pinpoint your slow seasons

    In some cases, such as a ski resort or surf school, the slow season is obvious. In others, it’s not as in-your-face—which can be more dangerous because slumping sales can sneak up on you and decimate your cash flow. Look both at the past and the future to predict when your business may slow down. For example, in Southern California where I live, the winter months are often a busy time for homebuilders and remodelers, since it doesn’t snow or get very cold. However, outdoor projects could be slowed down if the rains are heavier than expected. Projected consumer spending, weather patterns, and your own past sales history are all useful tools here.

  2. Create a budget that takes seasonality into account

    Budgeting can eliminate many of the cash flow issues a seasonal business faces. In addition to assessing when your slow season is likely to be, also note the times of year when you typically have the most expenses. For example, perhaps your business’s fuel and heating costs are higher in the winter, or your payroll is higher in the summer because you hire temporary employees. When you know your expected income and expenses, you can budget wisely.

  3. Educate yourself about business financing options

    Business financing is an invaluable tool to get you through the off-season. For example, you may want to investigate getting a line of credit or alternative funding methods such as invoice financing.

  4. Get paid faster

    Improve cash flow by speeding up payments. Tactics for doing so include:

    - Invoicing immediately when products are delivered or services are completed

    - Making sure invoices are accurate and sent to the right person

    - Following up immediately when payments are late

    - Accepting multiple forms of payment, such as credit cards, EFT, or mobile payments, and offering incentives for paying cash

  5. Delay making payments as long as possible

    Keep cash in your accounts longer by waiting as long as possible to pay your business bills (making sure, of course, that your payments aren’t late). Setting up automatic or online payments can help here.

  6. Develop a cash flow forecast

    This essential tool for any seasonal business projects your income and expenses for 12 months going forward. Accounting software such as QuickBooks makes it easy to create a cash flow forecast.

  7. Monitor your cash flow

    Don’t hide your head in the sand because you’re worried about cash flow—the only way to improve it is to keep an eye on it. Review your cash flow at least once a week (or even every day). You’ll feel more confident knowing where you stand.

  8. Cut costs

    Look for areas where you can slash expenses. If you haven’t done this in a while, you’ll undoubtedly discover some hidden costs have crept into your budget without you even noticing, and these can just as easily be removed. If your business slumps drastically during the off-season, you may even want to consider shutting down during that time and taking a “forced vacation.” This approach can work as long as you budget for your personal expenses during the closure.

  9. Increase income

    Don’t want to—or can’t—cut costs any further? Then you need to make more money. Even during your busy season, make sure you’re actively marketing your business to generate more sales that will tide you over during the slow times. You can also add new products or services to make your business less seasonal. For instance, I know of one company near a ski resort that runs a sledding business in the winter when it snows, and turns the sledding track into a water slide in the summer.

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Tags: FinancingRunning a Business