It can be quite tricky 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 is over. In some ways, cash flow is always a problem, but it is not impossible to manage. Sure, it will take a bit of effort and organization on your part, but it’s nothing that a dedicated business owner can’t handle.
There are a number of seasonal businesses, from agriculture to tourism to event planning. Although the nature of these operations is different, the cash flow management will be similar due to its seasonal characteristics. This is what you have to do.
Know your stations
You may think of this as a basic knowledge for any seasonal business owner. However, in most cases, business owners horribly overestimate their peak season. Additionally, they underestimate off-season operating costs. When you know the exact times of your season, you can draw precise conclusions that distinguish fact from fiction.
If you have a new business, you will need to start taking detailed notes from year one. Do some research based on other seasonal businesses, but if you’re established, it’s time to get the records out. Once you calculate your business peak income and expense periods and vice versa, you can plan a forecasting strategy.
Forecast your business
By forecasting your cash flow throughout the year, you can assess how much funds you have, in response to costs. You must analyze your records to form a plan regarding expenses and sales, and how much cash flow you can retain after the peak season.
You should perform an analysis of the sales and expense forecasts based on the factors that are driving it. This includes product lines, channels, and units. Then you need to check if your evaluation matches the accounting records.
When forecasting cash flow for your business, make sure you handle any references to sales on account, inventory management, asset replenishment, and debt settlement, 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 popping up despite the effort.
Maintain forecasts with concentration and money
Making a forecast log once is not enough and it never will be. The market and the economy can change in a second, so you shouldn’t 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.
Know the expected expenses
In a business, there are always some recurring expenses that remain fairly constant over time. You need to take them into account so you can accurately forecast expenses during off-peak seasons. These costs include the price of utilities and rent, but some will not occur to you. To know them, you must enter the account books.
In the end, you will be left with a somewhat expected figure for how much you will have to pay in quarterly taxes and business insurance premiums. You should add them to your forecast because planning them will be helpful during off-peak seasons.
Address changes
Sometimes it is enough to simply 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 off-season can bring to your business, think about what you can do to calmly face the inevitable. You will surely run out of capital no matter how well you manage cash flow, so what does one do? Take a loan.
Think of it this way, taking out an emergency loan just a few days before you pay your employees will be very different from applying for a bridging loan months before the off-season begins. For starters, you will earn a good interest rate and develop a good relationship with the bank.
A misconception is that well-run seasonal businesses shouldn’t need loans to generate cash flow during the off-season, but this is not true. It is much more feasible for a seasonal business to anticipate additional costs in advance and take a special loan when it sees fit. Investors and bankers will show a positive response to good planning and anticipation, so you should not forget to inform them about the seasonality of your business.
Restructuring of some expenses
As 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 get back to peak season. One of the things you can do is structure certain expenses to match the income you have in the current season.
For example, if you make artisan products and deal with material suppliers, you can work with them to demand larger payments in peak season and reduce payments in the off-season.
Empty your shelves
In today’s world of consumers, many people don’t shop during the season. This could be due to a number of reasons; they are trying to avoid the crowd or they just don’t want to pay the highest price. They’re waiting for an off-season sale to stock up, and as a good business owner, you need to provide.
Empty any excess inventory from the peak season by selling products at a fair discount. This will help you generate additional income as well as an off-season customer pool. Not to mention, it will also cut down on item storage expenses.
Improve your line of expertise
This is the last piece of advice any seasonal business can get and it has more to do with becoming a multi-seasonal business. Experts suggest that seasonal companies expand their line of work by offering different off-season services.
For example, roofing companies accept jobs like snow removal during the winter. Your business can do something similar and increase cash flow for the rest of the year.
Conclution
These 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 is no reason to do everything simultaneously. However, consistency is key. By slowly working toward a successful off-season, seasonal companies can improve strategies and drive peak season practices.