CASH FLOW STRATAGIES FOR YOUR SEASONAL BUSINESS

CASH FLOW STRATAGIES FOR YOUR SEASONAL BUSINESS

Cash flow is the lifeblood of any business. If it dries up, your business will wilt. With seasonal businesses, this holds even more true, which is why business owners need to have the right measures in place to smooth over the impact of fluctuating revenue and expenses.

Step 1: Have a good invoicing system

A good invoicing system should be quick, efficient and give you a snapshot of which clients are paying timeously and which are lagging behind. Having this information on hand will help you spot situations where you may need to adjust your terms of payment upfront and which will optimise your cash How in your company’s early stages.

It’s always a good idea to have multiple ways that your customers can pay cash, online payments such as PayPal, SnapScan or direct deposit into your account. Do everything in your power to make it easy for your customers to finalise payment.

On the vendor side, negotiate with suppliers for a discount or extended payment terms that lit your business needs. Although no one likes late payers, you could consider slowing down your payments delayed payments keep the money in the business longer but don’t annoy your vendors.

Step 2: Get a handle on fixed and variable costs

Of equal importance is understanding your fixed and variable costs, which will help you with forecasting. In this way, when cash is tight, you can scale back on your variable costs and try to link your variable costs with revenue. You could even consider closing your business during your quiet times.

Step 3: Enhance your offering

Mitigate the impact of seasonality in your business by brainstorming ways to expand your product offering. This could include complementary products or services that are in demand during your off-season. For instance, if you’re a wedding planner, you could consider doing corporate functions during the slow winter months.

Another option is to use your downtime to educate and inform your existing and prospective customers. This will stimulate interest in your products and services and boost demand before the next uptick in your business cycle.

Step 4: Establish a credit line

No matter how much you plan and prepare, some seasonal ebbs and flows will be beyond your control, which is why it’s important to set up a credit line. In the beginning, this may just be your credit card, but later you may want to explore other funding options, including bank loans or low-interest loans from family members.

Don’t be too eager to jump at the first bank loan you’re offered, Remember that long-term liabilities should be linked to long-term assets, while short-term liabilities should be linked with short-term assets.

Step 5: Plan ahead and budget accordingly

The reason SO many entrepreneurs struggle with their cash flow is that they don’t take the time to plan ahead and see the bigger picture. Get into the habit of budgeting and forecasting either monthly or quarterly so that you can prepare for the ups and downs of your seasonal business.

When you do have a bumper month, be diligent to set money aside for unforeseen expenses or lean times ahead. It’s a sign of maturity and prudence when business owners build up a cash reserve. Aim for at least three months of your company’s operating expenses.

It’s essential that you are able to project your income and expenses, while keeping an eye on inflows and outflows. If you can’t cope with this yourself, get a professional organisation to help you. With a little bit of effort on your part, you can ensure that your cash flow remains robust, nourishing the growth of your business.

By: Yaseen Parker