Seasonal Business Cash Flow: A Big Problem But With a Solution

Website design By BotEap.comIt can be quite complicated as a seasonal business. No matter how well you plan the year, you always seem to be struggling for a while after the profitable season ends. In some ways, cash flow is always an issue, but it’s not impossible to manage. Sure, it will require some effort and organization on your part, but it’s nothing a dedicated business owner can’t handle.

Website design By BotEap.comThere are a number of seasonal businesses, from farming to tourism and all the way to event planning. Although the nature of these operations is different, the cash flow management will be similar due to its seasonality. This is what you have to do.

Website design By BotEap.comKnow your seasons

Website design By BotEap.comYou may think that this is basic knowledge for any seasonal business owner. However, in most cases, business owners horribly overestimate their peak season. In addition, they underestimate the costs of operation in the off-season. When you know the exact times of your season, you can draw accurate conclusions that differentiate fact from fiction.

Website design By BotEap.comIf you’re running a new business, you’ll need to start taking detailed notes from the first year. Do some research based on other seasonal companies, but if you’re established, it’s time to pull the records. Once you determine your company’s peak revenue and expense periods, and vice versa, you can plan a forecasting strategy.

Website design By BotEap.comforecast your business

Website design By BotEap.comBy forecasting your cash flow throughout the year, you can assess how much funds you have, in response to costs. You need to analyze your records to form a plan regarding spending and sales, and how much cash flow you can retain after the peak season.

Website design By BotEap.comYou need to form an analysis of sales and expense forecasts based on the factors that drive it. This includes product lines, channels, and units. Then you need to check if your assessment matches the accounting records.

Website design By BotEap.comWhen you’re forecasting cash flow for your business, make sure you manage any references to sales on account, inventory management, asset replacements, and debt repayments, which are sensitive to cash flow. When you keep track of all of these things together, you won’t have to think about why unknown costs keep showing up despite your best efforts.

Website design By BotEap.comMaintain Forecasts with Concentration and Money

Website design By BotEap.comRecording forecasts once is not enough and never will be. The market and the economy can change in a second, so you should not stop checking and reviewing the changes. This theory of development ensures that you know what is happening, so that you can adopt a new strategy next time.

Website design By BotEap.comKnow the expected expenses

Website design By BotEap.comIn a company, there are always some recurring expenses that remain fairly constant over time. You need to take these into account so that you can accurately forecast expenses during off-peak seasons. These costs include the price of utilities and rent, but some will not come to mind. To know them, you must enter the account books.

Website design By BotEap.comIn the end, you’ll get a somewhat expected figure for how much you’ll have to pay in quarterly taxes and business insurance premiums. You should add them to your forecast because planning for them will come in handy during off-peak seasons.

Website design By BotEap.comaddress changes

Website design By BotEap.comSometimes it’s enough to just know when your business becomes vulnerable. Even if you can’t handle things yourself, you can still ask for help. Instead of worrying about the terrors the offseason can bring to your business, think about what you can do to calmly face the inevitable. Sure, you’ll run out of capital no matter how well you manage cash flow, so what does one do? You take a loan.

Website design By BotEap.comThink of it this way, taking out an emergency loan just days before your employees are due to pay their payroll will be much different than applying for a bridging loan months before the off-season begins. For starters, you’ll get a good interest rate and develop a good relationship with the bank.

Website design By BotEap.comOne misconception is that well-run seasonal businesses should not need to borrow to generate off-season cash flow, but this is not true. It is much more feasible for a seasonal business to anticipate additional costs in advance and take out a special loan as it sees fit. Investors and bankers will respond positively to good planning and anticipation, so don’t forget to tell them about the seasonality of your business.

Website design By BotEap.comRestructure some expenses

Website design By BotEap.comAs a seasonal business, you’ll need to pull a few strings here and there to make sure you get through the rest of the year until you return to peak season. One of the things you can do is structure certain expenses to match the income you have in the current season.

Website design By BotEap.comFor example, if you make handicrafts and deal with material suppliers, you can make arrangements with them to require larger payments in peak season and smaller payments in the off-season.

Website design By BotEap.comempty your shelves

Website design By BotEap.comIn today’s world of consumers, many people don’t shop during the season. This could be due to several reasons; they are trying to avoid the crowd or just don’t want to pay the higher price. They are waiting for an off-season sale to stock up and as a good business owner you need to provide them.

Website design By BotEap.comClear out any leftover inventory from the peak season by selling products at a fair discount. This will help you generate additional income, as well as a pool of clients in the off-season. Not to mention, it will also reduce item storage expenses.

Website design By BotEap.comEnhance your line of expertise

Website design By BotEap.comThis is the final piece of advice any seasonal business can get and it has more to do with becoming a multi-season business. Experts suggest that seasonal companies expand their line of work by offering different services during the low season.

Website design By BotEap.comFor example, roofing companies take jobs like snow removal during the winter. Your company can do something similar and increase cash flow for the rest of the year.

Website design By BotEap.comConclusion

Website design By BotEap.comThese are some of the solutions that a seasonal business can adopt to improve its cash flow during the low seasons of the year. Now, there’s no reason to do everything simultaneously. However, consistency is key. By slowly working toward a successful off-season period, seasonal businesses can improve strategies and boost peak-season practices.