Managing a seasonal business can be both exciting and challenging. The real challenge is making sure that your business gets through the offseason when your income is low. To help minimize your stress during this time, we gathered cash flow tips from experts to help you better manage your business when it’s not as active.
Here are the top 27 cash flow tips for seasonal businesses, straight from the pros:
1. Prepare Investors & Creditors
Jon Fasoli, Segment Leader – Small Business, Intuit
If your investors and creditors do not understand the seasonality of your business, you need to inform them. Investors should know your business challenges and strategies. Without a full understanding of your business, investors may pull their investment, or refuse to make additional investments as needed. Clearly communicating the seasonal impact on your business’s balance sheet will set appropriate expectations, and allow your investors to weather down seasons as a trusted partner. Creditors may be willing to adjust your payment schedule if they understand seasonal fluctuations in cash flow and revenue. Banks may offer deferment options that can accommodate down seasons. Suppliers that extend credit to your business may be flexible if you communicate seasonal changes to your income.
2. Review Your Receivable & Payable Terms
Ryan Gipple, Principal, Berkshire Business Sales & Acquisitions
If the seasonal revenue is not enough, a review of payables and receivable terms, and other negotiations with creditors or suppliers could yield results. By slowing down payables and increasing the speed of receivables, there should be an immediate impact to cash flow. Renegotiating rent payments to periods of high cash flow versus low cash flows could also provide some benefit. The immediate cash flow improvement from renegotiating your payable and receivables may provide enough cash flow to make it through the crunch.
3. Establish Goals For Slow & Busy Seasons
Jay DesMarteau, Head of Regional Commercial Specialty Segments, TD Bank
It is crucial that small business owners monitor capital inflows and outflows throughout the year to get a sense of peak revenue and slow times. Gaining a good view of your business’ assets, profitability and expenses during both busy and slow seasons can help owners better establish cash flow goals and processes. For example, during slower times, owners may consider taking less of a salary for themselves, reduce inventory orders to meet demand or “hire ahead” to secure part-time workers in advance of the start of the busy season, when talent acquisition becomes more competitive. Cash management goals should be synced to the seasonal nature of your business. Cash performance should align with short-term and long-term objectives and fall into buckets based on use: operating budget, short-term liquidity, or long-term liquidity. Once you’ve developed these goals, re-examine your revenue cycle to see if any money could be placed in a business savings vehicle to sustain operations during slow seasons or should be retained as cash-on-hand to meet demands.
4. Delegate Tasks During High-Peak Season
Kurt Rathmann, CEO & Founder, ScaleFactor
During the peak seasons, small business owners are hit with a deluge of new tasks, from extra seasonal employees on the payroll to more time-off requests and faster exchange of inventory. It can be easy for business owners to get bogged down in the madness of the peak season and therefore lose track of their accounting and back-office tasks. The easiest way to streamline finances during this time is to learn to delegate. By delegating tasks to other managers, or even a bookkeeping software, the workload can be managed more efficiently and business owners will have more time to focus on more important tasks. It might seem daunting to let go of control, but delegation to trusted employees or software will help keep the bevy of new tasks easily manageable.
5. Make Sure Your Financial Records Are Accurate
Jaren Nichols, COO & Co-Founder, Zipbooks
Even for a seasonal business, having accurate financial records is crucial. With these reports, you can make strategic, data-driven decisions for your business. Use cloud-based accounting programs to ensure your financial transactions are recorded accurately — they are incredibly secure and easy to use, and some of them are free! You can access this software any time of the day from any platform, and it syncs seamlessly with your bank transactions. Integrate your bookkeeping with other applications like reputation management and expense tracking tools to get the most out of your reports.
6. Time the Injection of Cash Flow From Outside Sources
Alex Shvarts, CTO, FundKite
Many businesses use outside funding to boost their working capital. But when you’re dealing with a seasonal cash flow, you have to carefully calculate when’s the best time to inject the funding into your business. The right timing depends on what kind of funding you get and what you will use it for. Short-term loans are best implemented right before the peak season kicks in because you will need a profit to pay back the money sooner. Short-term funding is typically used for stocking up on inventory and hiring early staff, or even dealing with unexpected repairs that need immediate attention. If you’re looking for funds to expand, remodel or some other long-term project that needs to be done when it won’t interfere with business, then a long-term loan would be better suited for your needs, as long as your budget has accounted for payback months when you are expecting little to no profit.
7. Take Advantage of Credit Card Rewards
Christina Stembel, CEO, Farmgirl Flowers
Effective cash flow management is pretty much a No. 1 priority for seasonal business during off-peak season. To better manage cash flow during this time, you can use credit card rewards to offset some of your business expenses. Charge as many business purchases to your rewards credit card as possible to maximize the amount of rewards you earn. There are credit cards with unlimited cash back, and you can redeem thousands of dollars in rewards. You can use these rewards to help you with your business expenses during the slow months.
8. Be Proactive in Collecting Account Receivables
Marco Castelán, Co-Founder, The Navio Group
One common misstep of seasonal businesses is failing to put a sound system for collecting funds from customers. For most customers, paying bills is not necessarily at the top of their priority list, and as a result, it can sometimes fall off their radar. By putting in software which flags overdue invoices, and then creating the necessary human interventions to make good on the warnings, a business can keep its cash flow more consistent and predictable. Often it only takes a gentle reminder for a customer to click an approval box or send a note to their finance department. But by ensuring your business stays on top of it, you help bring your invoice to the top of the pile.
9. Have Separate Bank Accounts
Carl Gould, Business Growth Strategist, CarlGould.com
Separate your banking accounts and make sure that the bills you may have to pay in the slow months have the cash sitting in them and keep them away from your operating account. This means you should have a separate account for taxes, operating expenses, and other obligations like credit cards and mortgages.
10. Stay Relevant During Offseasons
Victoria M. Hitchcock, CPA & Manager – Audit/Accounting Services, Gorfine, Schiller & Gardyn
In addition to ensuring that a seasonal business has enough of a cash surplus to get through the low season, we recommend that they find more creative ways to stay relevant during slower times. For example, enhancing their social media presence, offering an ecommerce site, and promoting gift cards can support overall brand awareness and revenue generation. As a backup, it’s always good to have a line of credit on hand, and strengthen relationships with mentors and other friends who can provide the right guidance.
11. Consider Purchase Invoice Financing
Phillip Konchar, Head Tutor, My Trading Skills
Purchase invoice financing is a clever way of dealing with slow periods. It allows a business to borrow money against unpaid invoices, which can help them to deal with spells where not much money is coming in. This helps keep cash flow levels normal at a time when it could otherwise be a struggle to pay salaries or bills.
12. Get a Line of Credit
Gerri Detweiler, Education Director, Nav
Seasonal businesses often struggle with cash flow when business is slow. A line of credit can provide you with funds to make it through until business picks up again. Shop around carefully though: if the cost is high, it can significantly impact your profits. Check your personal and business credit before you apply to make sure there aren’t items on your credit reports that will make it more difficult to qualify.
13. Have a Business Emergency Fund
Ryan Vet, Owner, RyanVet.com
Many business owners fail to set money aside each month for investing in their own business. With a positive cash flow, it is easy for a proprietor to take cash from their business as compensation for their hard work. Normally that cash then is split up in the business owner’s personal checking and savings account. While many business owners have decent personal finance practices, they fail to translate these to their businesses. Every business will inevitably have a rainy day. Whether offseason, needed repairs or broken equipment, a business will face a time in which it must spend more money than normal to remedy a problem. With that in mind, it is critical for all small business owners to save money from their businesses in a business account for a rainy day, just like they would do personally. This is critical to their success.
14. Diversify Your Business
Rishit Shah, CEO & Editor, TallySchool
Diversify your business in a way that you won’t be heavily dependent on the seasons for your majority of the cash inflow. For example, you can offer subscription services to your main customers. With this, you will be able to create a steady cash flow which reduces the uncertainty of a seasonal business. You can also diversify and create another product which is suited for a season in which you are currently experiencing lows, however, this can be more challenging.
15. Make Sure to Plan Ahead
Matthew Gillman, CEO, SMB Compass
Almost every business has times of the year that are generally busier than others. Planning ahead is the key to success of every business, but it’s even more crucial for seasonal businesses. Planning ahead can mean building a cash reserve to float working capital through slow periods, or making sure you have access to capital for the slow season. We encounter many small businesses that become reactive versus proactive, which can result in hardship. If you don’t have the ability to build cash reserves then you need to make sure you secure a line of credit or apply for financing while in your busy season. Lenders heavily weight current cash flow when underwriting lines of credit and term loans. Stay ahead of the game.
16. Promote Your Business in Countercycles
Joe Flanagan, Lead Project Engineer, Tacuna Systems
As a business, the best way to manage off seasons is to stay relevant. This involves a number of activities, one of which is to promote the business in countercycles. Promoting your business during offseasons makes it remain in the minds of customers. Also, you can offer enticing discounts during offseasons. By doing this, you make profit from customers who would like to save some cash. Concerning your personal cash flow as the business owner, it is important for you to find alternative streams of income. One technique is to offer a product or service, whose peak season coincides with the offseason of your main product or service.
17. Keep Track of Income & Expenses
Steven J. Weil, Ph.D., President, RMS Accounting
It’s especially important for a seasonal business to keep track of revenue and expenses carefully as reaction and timing are key to being successful. When success or failure for the year is based on a limited period of time, you have much less flexibility; and failure to react fast when dealing with costs and unsold goods can greatly affect profits and cash flow.
18. Minimize All Expenses When Possible
Deborah Sweeney, CEO, MyCorporation
The obvious challenge you’ll face as a seasonal business owner is your cash flow. So, it’s recommended to limit all expenses when possible. New owners should especially avoid the expensive technology until they can confirm their business will succeed. It’s best for business owners to rent equipment instead of buying. Don’t buy equipment for long-term use because you’ll have to deal with expensive storage fees.
19. Take Up a Side Hustle For the Low Season
Kershan Bulsara, Manager, Roofmaster
If your team has any extra skill set, use it to your advantage. For instance, we specialize in roofing construction and repairs mainly in the summertime; however, this kind of work requires some carpentry knowledge. With this existing knowledge, we are able to provide extra carpentry work such as interior renovations and redesign in the offseason, which helps bring in extra income and regulate our cash flow. Similarly, try to find something you can do and earn money from during off-peak to help your business get through it.
20. Staff Appropriately
Paola Garcia, Vice President, Excelsior Growth Fund
Staffing appropriately during and between high seasons is essential, as insufficient staffing during your busy season can mean lost sales and overstaffing during your low season can mean extra expenses that you don’t need and can’t afford. Consider hiring independent consultants on a temporary basis and scale down your staff in the offseason. Another option, if it fits your business, is to bring on employees on a commission-only basis, so that you’re paying less during your down time. Be cautious about providing benefits to seasonal staff. While benefits are a great way to retain talent, ensure that your business is profitable, stable and sufficiently capitalized first.
21. Offer a Lower Offseason Pricing
Russ Jundt, Founder, Conserva Irrigation
By offering your clients a discount off the next season’s package pricing, you will be able to make sales during the low season. This helps to better manage the business’s cash flow. Also, you take advantage of the offseason as it’s a great chance to study what worked and what wasn’t successful for your business while you are not very busy.
22. Understand Your Company’s Cycle & Needs
Wahid Choudhury, Consulting Senior Manager, Sensiba San Filippo
Understanding a company’s cash conversion cycle, cash burn-out rate, setting and maintaining cash cushion threshold, and projecting out a rolling cash flow forecast, shall go a long way for small seasonal businesses through the difficult periods of its year-round operation. Negotiate revolving lines of credit with commercial lenders and ask for COD or prepayment terms with existing clients. Explore options to access government-backed loans through Small Business Administration programs to lower cost of borrowing. Establish discount offers for clients and incentivize the company’s sales and marketing team to ramp up revenue and cash during lean periods.
23. Offer Different Payment Options to Customers
David Cawley, Chief Financial Officer, Micah Fraim, CPA
If cash flow is the main concern to a seasonal business, it should offer payment plans to customers that help distribute cash inflows throughout the year whether it be through financing or spreading the payments into installments. Depending on the nature of its business, many customers would prefer spreading payments out over a period of time and would even be willing to pay a premium for it. This not only provides the company with additional revenue but smooths cash flow throughout the year.
24. Expand Your Customer Database in Social Media
Ksenia Shirokova, COO, SarafanTechnology Inc.
Attract your new users with useful and up-to-date content. Produce a series of videos where you recommend, for example, how to protect winter shoes during the summer. Show your users the backstage, it will be interesting for many where you keep your skis during the summer and how you prepare your store for the winter season. One of the most entertaining ways of engaging with your audience is to organize quizzes and activities for them to complete. For example, ask them to send you pictures of your winter product in the hottest location. Share with the rest of the users the most unusual and fun uploads. This is a way to engage your customers and pique interest to your business.
25. Train Your People in Other Areas
Rune Sovndahl, CEO, Fantastic Services
Over the years, we’ve noticed seasonal fluctuations in gardening bookings. Due to weather conditions, gardens require higher maintenance during the summer, therefore, the demand for expert help is higher than during the rest of the year. To manage the seasonality better, we decided to cross-train the gardeners in other areas. This not only means that we can now afford to keep the same number of skilled gardeners all year long, but also we are meeting the demand for gutter cleaning and fence installation among other services as well.
26. Find a Way for Your Customers to Prepay for Your Services
Jeffrey Shaw, Keynote Speaker, Business Coach, & Brand Consultant, JeffreyShaw.com
Look for an opportunity for customers to prepay for your services or products during your slow season. Think about the Starbucks gift-card idea — imagine paying for expensive coffee before you even drank it, and not even for a discount. But think of what benefits and privileges your customers can gain by paying in advance. Perhaps you can offer a discount. Maybe first choice, even making them feel like VIP clients. All can motivate a client to pay in advance and provide your business with cash during an otherwise lean time.
27. Have a Safety Net to Increase Cash Flow Flexibility
Jacob Dayan, CEO & Co-Founder, Finance Pal
Seasonal business owners should always prepare for the offseason by working extra money into their budget, building an emergency fund, and getting an insurance coverage. In the unfortunate circumstance that there is an event like a flood that your insurance doesn’t completely cover, a business line of credit can help. One of the biggest upsides to this option is that having the funds available comes at no cost to you until you actually need them. Having that safety net will provide peace of mind and added flexibility with your cash flow.
It can be very stressful for owners when their seasonal business has low income and lacks cash during the off-season. It takes a lot of hard work and a few sacrifices to be able to manage your business’s finances. If your business is seasonal, make sure to use the above expert tips so you can take better control of your business’s cash flow, especially during the low season.