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Cash flow is difficult enough to master on its own, but your business is different than usual — it’s a seasonal operation. This makes cash flow all the more vital to the livelihood of your company since money’s only coming in during certain times of the year.
Of course, yours isn’t the first business to operate on a sporadic or seasonal basis. Because others have gone before you, plenty of tips are out there so you can be sure you’re really harnessing the power of your cash flow. Plus, you have the power of Forwardly on your side — we know how to help you manage your cash flow for a seasonal business.
Here are eight tips for managing cash flow for a seasonal business:
Set up a line of credit
You never know when your business might need extra cash, so it’s smart to secure a business line of credit before you actually need it. Waiting until you’re in a pinch could make it harder to get approved, especially if cash isn’t flowing in.
By setting up a line of credit now, you’ll be ready to handle emergencies without resorting to high-interest loans. This proactive step can save you money in the long run and give you peace of mind knowing you have a financial safety net in place.
Don’t let your accounts receivable grow
One of the best ways to keep your cash flow steady is to ensure you’re getting paid promptly. Use accounts receivable software like Forwardly that lets you get paid instantly. Say goodbye to delays with instant payments and free Same-Day ACH. Create and send invoices with ease, speed up your billing, and get payments faster.
Put invoice factoring on your radar
Sometimes, even with the best planning, a cash flow crisis can happen. You made a huge sale in the busy season and dipped into your resources to do so. Now that things are slowing down, the payment still hasn’t come in. If you need a solution that’s faster than applying for traditional loans or lines of credit, consider invoice factoring to help manage cash flow for a seasonal business.
Invoice factoring helps you turn unpaid invoices into funds by letting you sell your invoice to a factor (lender), who, in turn, pays you a set percentage of the invoice. You receive the balance, minus fees and interest, once the customer pays the invoice.
Audit your expenses
To make the most of your cash flow for a seasonal business, you should scrutinize any and every expense required to sustain your operations. Even though much of your money will, indeed, be necessary to spend, you might find little places where you can trim the fat. Something as simple as an online subscription service for $15 a month that’s left to renew during the off-season automatically can add up to a sizeable — and worthless — expense.
You might have to reconsider the size of your staff and their location, too. Renting a space for an entire year that you don’t need or keeping employees on the payroll even when the season’s over will add up. At a certain point, you can’t justify it — even if your business is staying afloat.
Diversify your offerings
Your seasonal business thrives during peak times, but the off-season can be challenging. Consider offering a complementary product or service that keeps your customers engaged year-round.
For example, cruise ships alternate between sunny Caribbean trips and scenic Alaskan voyages depending on the season. Similarly, resorts attract business with off-season retreats and conferences.
Not every business has a clear seasonal counterpart, but with some brainstorming, you might find an unrelated yet viable option. Just make sure to leverage your existing resources and team to stay aligned with your business plan.
Build an emergency fund
We’ve already covered the importance of setting up a line of credit, but don’t stop there—start building your emergency fund now. Aim for at least one month’s worth of operating costs to ensure you have cash on hand during tough times. It’s always better to be over-prepared than caught off guard.
You can start small, even by collecting spare change, or take more significant steps like consulting a financial advisor or using online tools to manage finances. The key is to treat this money as untouchable until you truly need it.
Use downtime to your advantage
Maximize your cash flow during the off-season by making the most of your downtime. Instead of coasting until business picks up, focus on improving your skills and business knowledge.
Consider taking courses to learn tasks you’d usually outsource, like video editing or digital marketing. This can save you money and give you more control over your operations. Training your employees to take on new roles can boost their morale and efficiency, setting your business up for greater success when the busy season returns.
Know your cash flow
No one knows your business better than you do. Use the tips above or find other ways to save cash during your off-season. Cash flow forecasting is crucial whether you’re managing a seasonal business or any other type. It shows you when money is coming in and going out, helping you plan for peak income periods.
The better you understand your cash flow, the better you’ll manage it. That’s why we created Forwardly’s free cash flow forecasting tool. With forecasts up to 12 months ahead, you’ll have the insights you need to make smart decisions all year round. What’s more, it’s free to get started with Forwardly. Take control of your cash flow today!
