For your seasonal business to continue to trade and succeed, you must ensure that you manage your cash flow effectively. Dealing with irregular trading patterns requires discipline and careful planning, otherwise, financial matters can very quickly spiral out of control.
Here we take a brief look at 5 tips for dealing with seasonal trading and cash flow management.
Tip 1: Plan in advance
Every business should have a plan, but when it comes to seasonal trading, it’s doubly important. And a cash flow forecast should certainly make up part of that plan.
By using forecasting in your cash flow you can pinpoint the weeks and months throughout the year where you’re likely to encounter a cash shortfall. You can then ensure you’re able to navigate those periods via another form of funding if necessary.
Tip 2: Get paid faster
One thing that can stop a business in its tracks is a lax attitude towards invoicing and debtors. When you’re dealing with irregular trading patterns, you need to make sure cash is flowing into your business as quickly as possible.
Be proactive about getting paid by sending invoices quickly, agreeing on strict payment terms with clients, and by chasing those that owe money. You might even consider setting up payment reminders prior to an invoice becoming due, or offering a discount for early payments.
Tip 3: Improve purchasing terms
Just as you should seek to receive payment quicker, you should also look at holding onto your money for as long as is reasonably possible. You can do this by seeking improved purchasing terms with your suppliers.
This might be via a bulk discount, or by agreeing on extended payment terms from 60 to 90 days.
Tip 4: Carefully monitor stock levels
Monitoring your stock levels can ensure that you don’t have money tied up in stock that’s sitting in your stockroom while demand is low. By keeping a careful log of your stock levels, you can observe patterns around when demand is high, when you need to place orders, and when you can direct resources elsewhere.
And if you have excess stock, consider a well-timed promotion to sell it and bring in some much-needed funds.
Tip 5: Save for a rainy day
When things are going well and sales are booming, there can be a temptation to take money from the business in the form of dividends or increased salary. However, it’s crucial that you plan for the inevitable dip in the trade that will follow your busy period.
You should consider setting up a business savings account and putting a percentage of income aside to cover any cash shortfalls that might arise when things get quiet.
Need Some Help with Your Cash Flow?
Get in touch with us to arrange an informal chat with a friendly Square Mile adviser and find out how we’ll help you overcome your seasonal cash flow challenge.