Surveys indicate that a large portion of small companies experiences slow-downs and increases in business during certain times of the year. This seasonality in the amount of available work can make it problematic to effectively manage company cash flow. Here are some strategies that can assist you with cash flow management at your seasonal business.
Identify Seasonal Differences
Firstly, you need to analyze your sales data so that you can identify the times of the year when you have fluctuations in sales. If you have a new business, study the sales information from similar companies. This will enable you to isolate your seasonal business’s high and low points.
Rent, utilities, and other constant costs are fairly easy to forecast. However, be sure to calculate the variability in other expenses such as insurance premiums and tax payments. Planning for these fluctuations ahead of time will help you in managing your seasonal business cash flow.
Periodically Update Forecasts
The best way to ensure that your company’s forecast for annual cash flow is as accurate as possible is to update it monthly. At the close of every month add a new month’s forecast, so that you are always a year ahead in your projections. This will assist you in making the most of peak seasons and keeping cash flow strong during leaner times.
Sometimes a seasonal business needs extra cash to handle urgent expenses, upgrade equipment, or ride out periods of lower revenue. One of the most useful funding tools for a seasonal business is a business line of credit. A line of credit provides you with needed capital, and the interest is generally less than if you used a credit card. If your cash flow projections show that you may require financing during future slow periods, apply for a line of credit ahead of your time of need.
For more advice on managing cash flow for your seasonal business, get in touch with 18 Sierra Financial.