Does your small business make most of its sales during the winter months? If you run a seasonal business, maintaining sufficient cash flow can be challenging. Here are 8 tips for seasonal businesses who thrive in the fall and winter, and how to keep cash flow under control in those off seasons.
1. Pinpoint your slow seasons
In some cases, such as a ski resort, 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 states, 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 in rainier or hotter months. 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 correct point of contact.
- Following up immediately when payments are late.
- Accepting multiple forms of payment, such as credit cards or mobile payments, and offering incentives for paying cash.
5. 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.
6. 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.
7. 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.
8. Increase income
Don’t want to—or can’t—cut costs any further? The other option is increasing revenue. 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 consider adding new products or services to make your business less seasonal.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.