Managing Cash Flow for a Seasonal Business
March 12th 2019 at 10:07am Published by sharpshooteradmin
Cash flow is undoubtedly the one thing that can help a small business make sure that they grow progressively over time. A business that has plans to grow in the nearby future should keep a stringent check on their cash flow, so that they experience whatever growth they have in mind.
While cash flow and the amount of cash present in the business is easy to manage for some businesses, it can be quite a hassle for seasonal small businesses. Let’s imagine you have a seasonal business where you sell a commodity or a service that can only be used by your customers during a special season or environment. Once that season goes, you would have nothing to sell and would be back to having a limited cash flow.
Such businesses see a sudden spike in their sales, which is more often than not negated by periods of low cash. These spikes in the cash flow statement make it hard for the business to manage cash in a wholesome manner.
Here we mention some tips that small seasonal businesses can do for managing cash flow around the year:
Identify Slow Seasons
The first thing you need to do as part of resolving this issue is to identify the slow seasons that you have in your part of the world. If you’re a ski resort providing skiing equipment and experiences to customers, your slow season would be the summer season. Hence, you can outline this for your assistance.
Once you have this information listed down, you can tell whether you need small business funding at a given time or not. If you have a limited cash balance in the summer season, you shouldn’t worry about it because this is your off season without the snow.
Create a Budget Accordingly
Once you know the seasons and can differentiate them on the basis of the activity that happens during them, you can create a budget accordingly. A budget would help you distribute your costs across seasons, so that you know just how much cash you need.
For instance, if you run a ski resort, you would need some cash for maintenance of the resort, regardless of the season. So, the maintenance cost would have to be incurred during the off season, even if customers aren’t coming.
Diversify Your Business
If you feel that you’re wasting resources during the off season then you can try your luck at diversifying your business as well. By diversifying your business we mean that you can add a completely different activity to the mix here. The activity would help you plan for what is to come. Carrying on the example above, if you own a ski resort, you can diversify your offerings to make it a retreat center or a conference center during the summers. This wouldn’t disturb your cash flow.