How to Manage Cash Flow During Seasonal Peaks and Valleys

Some businesses make most of their money in certain seasons each year. This makes it hard for them to manage their finances all year round, especially for businesses that make the biggest gains in summer. Places like ice cream shops, theme parks, stores, and gift shops do best during the summer months.

Such businesses and various other niches experience a boom in business and capitalise on the seasonal highs. With the peak times come the slow periods or valleys. Business owners need to put aside some of the revenue that they earn during peak months to help them sustain during the slower times. Managing cash flow during these ups and downs requires nuanced cash flow management. With effective planning and cash flow management, these businesses can survive and also achieve growth.

Some businesses, like an ice cream store, may experience a slow-down in business during cold months and achieve peaks during the summer. Other businesses may remain closed for months at a time. There are also some businesses, like grocery stores, that operate all year round. Cash flow management is critical for both sustainability and success. We will explore some critical insights on how to manage cash flow during peaks and valleys.

Forecasting and Planning

Using historical data, business owners can analyse sales, gross turnovers and net profits during busy months as well as lean periods. Prepare a detailed sales forecast while factoring in peak season times and slow periods. Consider anticipated expenses, as well as both variable and fixed costs. This information will help you predict cash flow needs and create a realistic set of goals to help you maximise growth during the peak season and sustain during slower periods.

Create an Off-Season Budget

Plan ahead for the lean periods and create a budget. For example, off-load excess inventory during the peak business periods and avoid overstocking prior to the slow phase. Avoid unnecessary expenses and space out any repairs or renovations before the next seasonal peak. The budget will also serve as a cap that business owners should ensure they do not cross.

Renegotiate with Suppliers

Most businesses have strong relationships with their vendors. One of the best ways to bolster profits and reduce purchase costs is by negotiating more favourable terms. Negotiating new terms can include bulk purchase discounts or a higher commission per purchase. Depending upon the nature of the business, there are various aspects that can be reworked to help reduce costs, improve profit margins and even tweak your business model.

Diversify and Create New Revenue Streams

Diversification is a great way to create new avenues for growth, especially during slower periods. For example, an ice cream store could consider creating a special menu during colder months. They could offer hot beverages, coffees or warm desserts during colder months as opposed to not operating since ice-creams don’t sell as much during the cold. Garden care businesses can clean up leaves or clear snow when summer ends. They can also sell more in quiet months by giving out money-off tickets, rewards for regular customers, or big sales when seasons end. Diversifying your business and adapting your services to fit the off-season scenario will help you build alternate sources of revenue. When you get out of your comfort zone and create new services, it will create new growth opportunities for your business in the long run.

Leverage Technology

It is possible to create cash flow forecasts manually, but it is time-consuming, with plenty of room for human error. Instead, you can use computer tools to make this work easier. Pulse is a platform that looks at all your cash flow data and helps you understand what it means. It shows you how your business is doing right now so you can make better choices quickly. You can see your sales, profits, and money you owe or are owed anytime you want.

Seeking Financing Options

In addition to the above insights, business owners can always look for external funding to help them bridge the gap during the slack season. The most preferred solution is a line of credit. It offers the business owner flexibility. You only need to pay back the amount that you’ve used. The business owner can make multiple withdrawals as and when required, depending on the cash flow situation.

The other option is a short-term loan. There are plenty of options, including traditional loans from banks, P2P funding, crowdfunding, or angel investors. Look at what your business does and pick the way that works best for you.

Build Emergency Funds

Unexpected problems or emergencies can happen at any time. Business owners need to save some money just in case these things happen. Whether it’s natural disasters, sickness outbreaks, political problems or fighting, it’s always smart to be ready. Then, if something goes wrong, you’ll have enough money to keep your business open and weather the storms.

Conclusion

Financial planning and cash flow management are powerful tools to help a seasonal business sustain and thrive. The above insights should serve as a guide to help you achieve stability and growth for your seasonal business. Remember that it’s easy to get comfortable when things are going well during the high season months. If you don’t observe cash flow patterns closely, your business could get into trouble. By following these tips, you can build a strong business that can do well in a variety of scenarios. For further help with managing cash flow fluctuations, call us today at 020 7839 1980 or email us at [email protected].