609-917-6200

For many small businesses, September marks either the end of the busy summer season or the ramp-up to the make-or-break holiday season. If you generate the bulk of your revenue during specific times of the year, it is important to have a strategy to ensure sufficient cash flow when business hits a lull.

Poor cash flow management is one of the top reasons why many small businesses fail each year. Among successful small business owners, 49% say cash flow worries keep them up at night. If you run a seasonal small business, the following best practices can help you manage your finances during a slowdown and keep your operations humming all year long.

Forecast your income and expenses.

A good cash flow forecast is an essential tool that projects your income and expenses throughout the year. Without a plan in place, seasonal business owners may run short of the cash they need to cover day-to-day operations, pay employees, or purchase inventory. When you know your expected income and expenses, you can budget accordingly.

Review income and expenses from previous years to help you set an accurate goal. Where possible, structure expenses so they fit the revenue available. It goes without saying that you’ll need to save earnings during your peak season in order to cover off-season expenses. While you may not have many customers during a lull, you still have bills to pay and work to do in order to prepare for the next peak season.

Look for areas where you can lower expenses during slow periods. For instance, you may be able to arrange with vendors to accept lower payments or negotiate with the owner of your building to lower your rent during the off-season. If your business declines dramatically during certain months, you may want to consider closing your doors. Make sure you budget for your personal and business expenses during that time.

Track your cash flow.

The best way to improve your cash management is to track the flow of funds in and out of your business. Develop the habit of examining your finances at least monthly. Some small business owners review and analyze cash flow once a week in order to know where they stand.

Summit Financial Resources understands that even the most successful seasonal businesses can run short of funds. Business financing is a valuable tool for ensuring that you have stabilized cash flow. For example, our core product, invoice factoring, allows you to harness the cash in your accounts receivable to cover shortages whenever they arise. This makes it a vital year-round cash management strategy for many owners of small to medium-sized businesses.

Diversify your product or service mix.

In addition to reducing expenses, investigate ways to earn more income during slow periods by diversifying into alternative products or services. Focus on who your customer is, not on what you currently offer. Your customers spend money all year long, so research what they are buying and add it to the mix during your off-season. For example, an accounting firm can help small business with bookkeeping or payroll. A retailer that sells beach-themed products can stock items geared towards fall and winter holidays.

Consider creating off-season demand through partnerships with other businesses or by offering deals to local customers. Look into opportunities to sell online. Be sure to test new items or services you plan to market to confirm there is demand and that you can meet the demand with your current resources.

Maintain flexible staffing options.

For many small businesses, the ups and downs of seasonal supply and demand make it impractical to maintain a consistent payroll throughout the year. Hiring temporary help is a cost-effective strategy for managing the extra workload during peak periods.

A contract or temporary worker can provide the specific skills or services you need with a lower overhead cost. In seasonal positions, employees generally cost more because they are covered by a company’s benefits and insurance. Because you do not have to provide contract workers with benefits, you can expect annual savings of as much as 20 to 30 percent. You can further reduce expenses by staffing up with temporary workers during your busy season and letting them go when business slows down.

Manage equipment expenses.

Every small business relies on equipment to operate, whether it’s machinery, computers, office furniture, or vehicles. If you need new or upgraded equipment for your seasonal business, it makes sense to plan for it when your cash flow is high. Spending too much of your reserves on equipment when your income drops could leave you strapped for funds to pay salaries and overhead.

If you use a lot of equipment, it might be best to buy it. However, high initial costs plus maintenance and repairs may make this a less-than-ideal option. Consider purchasing all or some of your equipment used. You can find everything from computer monitors and copiers to desk chairs at a fraction of full price at used equipment stores, as well as auctions, online classifieds, and social media sites.

Leasing business equipment instead of buying it allows you to acquire what you need with a minimum initial expenditure, freeing up working capital for day-to-day operations. Leasing also gives you an opportunity to upgrade equipment at a lower cost, a smart strategy for keeping pace with rapid changes in technology. Renting can be a good option if you only need the equipment for a few months of the year.

Put your downtime to good use.

The off-season presents the perfect opportunity to prepare for your next peak business cycle. Assess customer needs and your financial performance. Revise your business plan. Create budgets that reflect seasonality. Forecasting and budgeting will help you focus on the big picture and develop a clear-cut strategy for surviving the inevitable ups and downs.

Working Capital Financing is a few clicks away.

Apply online and get started today >

Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.