If you have a seasonal business, managing cash flow through the seasonal ups and down can be a bit of a balancing act. You want to invest to make the most of your busy season and still have enough cash to carry you through the off-season. This will allow you to stock up for the following busy season. Many business owners experience cash flow issues at some point in this cycle. This can make keeping up with expenses and investing in your business difficult. The goal is to effectively manage your cash flow so you consistently have a sufficient amount to do both. Here are some tips to help make that happen.
It can be tempting to overspend during the busy season when funds are plentiful. However, when it comes to managing cash flow, there is something to be said for saving for a rainy day. Your off-season is that rainy day. That’s not to say that you shouldn’t reinvest some of those funds for upgrades or improvements. Just keep some of it in reserve for when business slows down.
How much should you set aside? Review all your expenses for previous slow seasons and add in any new ones you’ve incurred. Then add a little extra to that amount to give yourself a cushion. How much extra? As much as you can comfortably put aside without impacting the success of your busy season. You want to make sure you have enough inventory and staff to keep up with customer demand during that time.
In business, time is money, so time management is an important part of managing cash flow. Seasonal businesses need to plan projects and set deadlines with the seasonal fluctuation of business in mind. It is best to plan larger projects for the off-season and only focus on urgent deadlines during the busy season. Tackling a big project in the middle of your busy season will shift your focus from what’s important – meeting the seasonal demand of your business. Taking your eye off the ball could result in a less than stellar peak season and smaller profits.
Prepare for each season in advance. A good rule of thumb is to plan six months out. For established businesses, you want to look at the last 2 -3 years to see how much you generated in sales. This will help you forecast future sales and the proper workforce and equipment required to realize your forecast. For new businesses without a sales history, look to industry trends to estimate your future sales and prepare for them. Try not to overstock as any inventory remaining at the end of your busy season will end up on clearance, generating little or no profit.
Managing cash flow isn’t just about preserving your working capital. It’s also about building relationships that result in future business. Stay in touch with your customers during the off-season by sending out special offers and informational emails. Not only will this keep your business top-of-mind, but it will let your customers know that you value their patronage. It could even encourage off-season business.
Need a Little Help Managing Cash Flow?
You know what they say about the best-laid plans. Even those who diligently budget and plan ahead can sometimes experience a seasonal gap in their cash flow. CFG Merchant Solutions provides various funding options to help bridge that gap. Our team brings to the table more than 60 years of institutional investment banking experience in the credit, commercial finance, and capital markets. From a merchant cash advance to equipment financing, or any of our other funding options, we will help you choose the best solution for your business needs. Contact us or apply online today.