While many businesses see consistent cash flow throughout the year, others are impacted by seasonal fluctuations that can be difficult to manage. Whether you manufacture and sell a seasonal product or you provide a service that is generally sought after during a certain time of year, learning to manage your budget appropriately is critical to weathering those slower months. Luckily, there are a few things you can do minimize the impact of inconsistent revenue. Here is a list of eight tips for managing seasonal cash-flow fluctuations.
1. Nail down your cash-flow forecast
An accurate forecast is your first line of defense in mitigating seasonal cash-flow challenges. Your forecast can tell you when your major expenditures will hit and give you an idea of whether or not your current cash position will get you through the trough. If you don’t already have your short-term and long-term forecasts built, here are some tips to help you get started.
2. Reconcile your accounts regularly
Stay consistent with your reconciliation schedule so you always know how much cash you have in the bank. Block time on your calendar a few times a week and comb through your accounts to ensure sure your budget and your account balances are on track.
3. Reduce the time it takes to get paid
Consider creating shorter invoicing terms so your debtors get your cash to you quicker. Also, make sure you have a solid process in place to follow up with slow paying clients. Here are a few tips on setting your invoice terms.
4. Talk to your vendors
Communicate with your vendors about your seasonal cash-flow challenges and ask for extended payment terms during those months. You may be able to slow down payments and keep cash in the business longer.
5. Factor seasonal cash flow into your budget
Create a budget that forces you to save money during your peak season to cover operating costs when it’s slow. Be prudent and create a reserve of cash that will take care of your fixed costs and you will save you a lot of headaches down the road.
6. Decrease expenses during the slow season
Cut the fat during the slow months and run lean. Look at any superfluous spending and make an effort to diminish it as much as possible. For example, check on any subscriptions or services you might be able to temporarily suspend until sales pick up again.
7. Hire contractors or freelancers to save cash
One of the most significant challenges when running a business that is impacted by seasonal cash-flow fluctuations is managing your human resources. It’s important to have a solid team in place when you need them, but payroll can be a huge burden when you don’t have cash coming through the door. Consider hiring contractors or freelancers to help you out during the busy season as opposed to hiring full-time employees. You’d be amazed the variety of roles you can fill using sites like Upwork or Toptal.
8. Establish a plan B
If you’re operating a seasonally-impacted business—or any business for that matter— it’s important to have a plan B. Working with a business lender can help you fund operations when your working capital falls short. Find a lending partner who can help you close the cash gap and continue growing your business even when sales are slow. If you’re looking into options, check out this post we wrote on the best online lenders.