The holidays are right around the corner. And for many small businesses, that means the start of busy season. Seasonality is a fact of life for most companies. Whether your business is based on tourism, the weather, or the holiday shopping season, there are times of the year that are significantly busier or slower than others. When revenues swing wildly from month to month, it can be easy for cash flow to get out of control. The key to success is being prepared for the busy season and ensuring you have enough cash to cover expenses during the slower months.
Here are four tips to help you manage cash flow in a seasonal business:
Know your peak season. This may seem like a no-brainer, but knowing exactly when your business will be the busiest is essential. Once you have a handle on your busy season, you can start planning for it. Make sure you have enough inventory to meet customer demand and a workforce prepared for the increase in business.
Plan for the slow season. Just as important as knowing your busy season is knowing your slow season. This is the time of year when you must ensure you have enough cash to cover expenses. Because business will decline during the slow months, but operating costs will not.
Diversify your offerings to improve cash flow in the off-season. One way to even out the fluctuations in cash flow is to diversify your offerings. If you typically only offer one product or service, try adding a new offering during the off-season. This will help generate revenue during the slower months and improve your overall cash flow.
Invoice promptly and manage receivables carefully. Finally, one of the most important things you can do to improve cash flow is to manage money owed to you. Make sure you send invoices as soon as products or services are delivered. Follow up with customers who are slow to pay. And make it easy for clients to pay by accepting multiple forms of payments. The sooner you get paid, the better your cash flow will be.
Need help preparing your business for year-round financial success? Boris Benic and Associates can help. Running a seasonal business can be challenging. But, by being primed for the busy season and planning ahead for the slow season, you can keep your business running smoothly all year.
Schedule a meeting with us for tools and strategies that will fuel your business growth.