How Seasonal Businesses Can Improve Their Cash Flow

How Seasonal Businesses Can Improve Their Cash Flow

Seasonal businesses are ubiquitous in today’s world. Be they in the travel and tourism industry, retail or a business which is contingent upon certain weather conditions, seasonal businesses are everywhere. One of the biggest challenges that seasonal business owners face is managing cash flow even in times when business is slow. What are some ways in which seasonal businesses can improve their cash flow in off times?

One of the best ways for seasonal businesses to manage their cash is to plan ahead for those slow seasons. By planning ahead and saving a reserve of cash for the future business owners can keep the business open during slow times, if they choose, without suffering financial ruin. Another way to improve cash flow during slow times is to take advantage of a line of credit with a business lender. The line of credit will allow  business owners to advance the cash needed during slow seasons. The business will then be able to pay off what they use from the line of credit when business picks up in peak seasons.

Many seasonal business owners also choose to diversify the products or services they offer during their off seasons.Take as an example a landscaping business. Although the warmer months are the peak time for landscaping, during winter months the business could diversify and also offer things like snow removal. A seasonal business could also improve cash flow by making arrangements with vendors to pay higher amounts during peak season and an adjusted lower amount during off times, allowing them to hold on to revenue during those slow times.

For those businesses that involve merchandise, management of inventory is vital. The price of any merchandise left over at the end of the peak season should be marked down and sold to consumers at a discounted rate. This last-minute reduction of cost will serve to increase the revenue of the off season and reduce the costs of carrying over and storing excess inventory. Also, if merchandise suppliers  will allow excess inventory to be returned to them, then that may give the seasonal business a credit with the suppliers that can be used for their next peak season’s orders.

Managing cash flow for seasonal businesses is very possible. However, planning and forethought are needed to mitigate losses in revenue during slow times. The key will be for businesses to sit down and streamline cash management techniques when revenue is high so that when things slow down they will still be able to remain afloat.