The cash flow of your company determines the profitability of the business, your ability to grow and expand, and whether or not hiring a new employee will be a good return on investment. For seasonal businesses, managing cashflow can be even more complicated. But if you really think about it, almost all businesses have some sort of seasonality due to the constantly changing health of the economy and the confidence of shoppers. It’s always better to be prepared.
Read through this list of cashflow tips for seasonal businesses to get your company on track:
Incoming Cash
Cash is the oxygen of your business. The below cashflow tips address how you can get your cashflow in check, even during the slow months.
1. Get Your Invoicing System Down
You can’t have a healthy cashflow if your clients aren’t paying you! This is especially important for businesses who have customers that don’t pay for the product or service right away. Set up a process and solid system for invoicing.
2. Create a System for Collecting
No matter how on point you are with invoicing clients, there are still going to be some who you’ll need to follow up with. Put a system in place for chasing down these outstanding invoices, and set a goal to decrease the amount of time it takes to get paid.
3. Give Customers Multiple Ways to Pay
Making it easier for your customers to pay you is another way to boost your collection efforts. Can you accept online payments? Or credit and debit cards using a service like PayPal or Square?
4. Offer Promotions During the Off Months
Brainstorm a few promotions that you can do when business gets slow. This might be a discount you run through social media, or the launch of a new product that’s relevant to the season.
5. Expand Your Products/Services When it Makes Sense
Now that you’re tracking sales, revenue, and expenses along with your cashflow projections, you can determine if adding or expanding a product or service line is feasible and makes sense. Depending on what you expand into, this new product or service can help you combat seasonality by offering your customers something enticing in the off season.
Expenses
Everyone knows your revenue needs to be greater than your costs in order to stay afloat, but sometimes this is easier said than done. Below are a couple of tips to keep your expenses in check:
1. Save up for emergencies
Just as you should have a personal emergency fund saved to cover expenses, you should have a rainy day fund for your company. Put money in your business savings account for those slow weeks or months. Be sure to have enough to pay all your monthly overhead and business taxes.
2. Hire the Right People at the Right Time
It can be tempting to bring on more employees when times are good, but this is an easy way to put yourself in the red. Make thoughtful hiring decisions, and ask if the job can be outsourced to a remote employee or if your team can push through the extra work for a month or two.
Of course you want to hire the right people too! A good strategy is to hire people who excel in multiple areas. Maybe they’re great at customer service, but also have a knack for connecting with potential customers on social media.
A Healthy Cashflow: Saving and Investing
1. Run Annual Cashflow Projections
Take a look at how your cashflow is doing at the end of every month, and run projections before the beginning of each new year. Compare sales and profit numbers to previous years to help you make informed decisions.
2. Brush up on Your Financial Knowledge
Even if you’re not directly in charge of your company’s finances, you still need to be financially literate. Here are a few articles to get you started:
– 7 Financial Rules of Thumb to Stay on Track
– eBook: The Small Business Owner’s Guide to Company Finances
– Common Small Business Accounting Mistakes
3 Most Effective Methods for Forecasting Sales
3. Bring in an Expert
You don’t have to bring on a full-time employee, but a part-time, outsourced CFO or financial consultant can help you get on track and stay there, while answering all your tough financial questions. This will allow you to focus on other areas of your company.
Good luck putting these tips and best practices to use!
