Large swings in revenue throughout the year brought on by holiday shopping, weather and other annual events can make it exceptionally difficult for seasonal businesses to plan and sustain a positive cash flow.
The following tips can help seasonal businesses cope with downturns and effectively manage cash flow throughout the year:
- When times are good, get a line of credit. The best time to set up a line of credit is when you don’t need it. Not only will you have the extra time it may take to secure a loan from a bank, you’ll also gain peace of mind knowing that it’ll be there when you need it.
- Leverage your supplier relationships. The goodwill you build with your suppliers will likely make them more inclined to help you out with alternative terms that keep cash in your pocket during low sales periods. For instance, your suppliers may agree to hold a portion of your inventory and accept payments upon release, instead of requiring upfront payment for the entire lot.
- Create a labor strategy that optimizes your cash flow. Consider giving your employees time off during low seasons and incentivizing them by offering higher pay during peak seasons. You can also minimize your need to hire extra staff or pay overtime during peak season if you’re able to shift some of that work into the downtime months when your employees are light on tasks.
- Partner with your customers. Your customers can help you maintain a steady cash flow throughout the year with the right opportunities. Incentivize them to make purchases during your low season by offering worthwhile discounts that expire before the peak season.
Seasonal highs and lows are a reality for many businesses, but they don’t have to create uncertainty. With the right planning and financial insight, you can maintain stability and position your business for long-term success. Contact your advisor today to build a stronger financial future year-round.
