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Cash flow management: How to manage cash flow in seasonal fluctuations


As a business owner, you will always be faced with challenges and obstacles that you need to deal with. If your business happens to be a seasonal business, those challenges can be much larger. While there are many unique issues that seasonal businesses face, cash flow management is easily at the top of the list.

For seasonal businesses, there will be months where the business is bringing lots of cash, then there will be months in the year where no cash is coming in at all. Obviously, you don’t want to permanently close your business during those off-months, so what can you do to ensure that the business stays afloat and is able to open its doors once again in high season?

Cash flow management strategies for fluctuating revenue

Here are a variety of strategies and advice you can use that will help you with cash flow management during seasonal fluctuations.

Be aware of your expenses and income all year round

The first tip is to make sure that your projections and forecasts are accurate when it comes to how much your business will make during its season, and then what the expenses will be during peak and off-season. This exercise is necessary so that you can determine how much money you need to make in order to cover expenses, and then figure out what you will be left with after that. Experts recommend that you create a 12-month plan or spreadsheet that shows your expenses and income. Just be sure to update it when necessary if any of the information changes.

Only hire employees during your busy times

If your business is open year-roundbut you have a peak time, then it’s best to hire extra staff during that time and then lay them off when the busy season ends. Carrying the salary expenses of all those extra employees will only drain your cash flow that much faster during the slow season.

Explore new partnerships and deals during off-season

It can also be useful to be creative in terms of partnership deals during the off-season. Perhaps there is a way to still sell your goods and services through local customers, partnerships with other companies, or even in an online platform. Even if these efforts only bring in a small number of sales, it’s still going to count as cash flow coming in.

Consider a business loan

Even when you use all these tips and advice it can still be very difficult to manage your cash flow in a seasonal business. With that said, it may be worth looking into a business loan. You can get loans now from Become that can be approved in as little as a few hours, giving you access to cash quickly. This can make the difference of keeping your business afloat or seeing it fold before your eyes.

Stay organized and realistic

The big key to managing your cash flow in a seasonal business is to stay organized all year round and be realistic when it comes to your income and expenses.

Five lessons in cash flow management from the pandemic

Financial survival is high on the agenda for many companies after the pandemic. Lockdowns hit many affected companies even harder and most businesses had to think about cash flow management for the fluctuating revenue. How should you manage your finances in this situation? How can you ensure the continuity of your company? How are things going now? The good news is you don’t have to start from scratch. You can and should orient yourself on the lessons you learned during the first corona waves in order to make the right decisions now.

1. Agility is the key

Those who were agile were able to transform their operations and optimize their sales and cash flow management, reducing the impact of the economic slowdown.

2. Focus on health and safety

Reducing fears among consumers and employees is of the utmost importance, so safety measures and disinfection protocols must be implemented. In addition, communication and constant vigilance are critical to restoring employee and consumer confidence.

3. Lower expenses

Lowering expenses by the reduced activity can help companies break even and thereby keep the business going.

4. Keep a tight grip on cash flow

The maintenance and provision of cash flow management and administration of receivables, as well as the daily control of liabilities , are essential for the continued existence of your company.

5. Make frequent financial projections

Frequent predictive financial and cash flow management is a key focus today so that owners and managers can lead their businesses through difficult times.

Overall, the first step for any company worried about its finances should be making sure these lessons from the pandemic are implemented across the company. Each of you face different circumstances. Some companies can still maintain an optimistic outlook because they provide essential services. But what if there is a sudden drop in demand? What if you experience another severe shutdown? Or if the economy suddenly revs up again?

Scenario planning is a way to prepare for the worst while still being armed with working capital through cash flow management when business picks up again. We ask our clients to consider three different scenarios:

  • Survive, reduce casualties
  • Normal but reduced activity
  • Business as usual with potential for growth

These three scenarios have been broadly defined and used as a guideline for your behavior in terms of boosting sales, staying on budget, and anticipating cash flow. They each require different cash flow strategies and are designed to help you plan and identify problem areas before they occur.

Scenario 1: survive, reduce losses

In this scenario, your business may not earn enough to break even. Risk mitigation is key, especially if you expect your business to remain dormant or at such a low level of activity that you risk bankruptcy. When you find yourself in this situation, there are three strategies to consider:

1. Reduce business activity for services that are unlikely to break even in the next six months. Calculate the minimum sales you need to survive another closure. If you feel that you will not be able to achieve this goal then look for ways to turn or develop the business.

Focus only on the essential costs and eliminate the non-essential ones. Total / Add up all of your fixed cash expenses such as rent, salaries, communications, interest and loan repayments. Then divide that by the margin you make on each sale (usually a percentage). If you feel that your business is not breaking cost, you may need to consider cutting your expenses to the bare minimum and resting until things return to normal.

2. Assess your investments and financing options. Can you sell fixed assets or inventory to make ends meet? Is it possible to sell equipment or vehicles in order to get some cash for the operation? Can You Renegotiate Your Loans? Are there potential investors to get a short-term cash injection?

3. Renegotiate fixed costs. Consider whether your fixed costs can be converted into variable costs. Is it z. B. possible to approach your landlord and change your rent to a turnover-dependent rent (e.g. percentage of turnover)? With this arrangement, your rent increases as revenue increases, but cash flow also reflects business activity and is easier to manage. Check if this approach can also apply to other fixed expenses, such as: B. for salaries.

Scenario 2: normal but reduced activity

Companies in this scenario are operating between 50% and 70% of their “normal” capacity. Aside from rigorous cash flow tracking, consider cutting expenses. We suggest these four strategies in particular:

1. Maximize your profit margins and look at your current sales and income streams:

How do you make the most money and can you expand those revenue streams? Would it be possible to slightly increase the prices of some of your best-selling items? Remain vigilant in managing your expenses and cash flow management for each line of business and each expense item. Move or reduce negligible costs and identify ways to convert fixed costs into variable costs. Can you e.g. work from home or move to a co-working space to convert fixed rental costs into variable costs. This gives you additional flexibility.

2. Be aware of the credit risk:

Make sure you have an appropriate cash flow management process in place to ensure that new customers are able to pay you. You should also monitor your slower paying customers more closely to avoid bad debts.

3. Make sure your delivery channels are not compromised:

The initial lockdown resulted in restrictions and delays in the supply chain. Manage your supplier relationships, understand commitments and make sure you don’t run into delays.

4. Maintain your credit rating:

Your lender knows these are difficult times. Maintain an honest and transparent relationship by speaking openly about the challenges you face and how you address them with cash flow management and other strategies. Keep in touch with your lenders and make sure you meet your commitments. Your credit score will help you when you recover.

Scenario 3: Business as usual, with growth potential

With your business in this fortunate position, keep building your cash and remain vigilant about your spending and cash flow management. You’re not ready to spend on unimportant things.

You can start thinking about investments that you may not have been able to make before. Interest rates are lower than ever. Productivity and technology play a bigger role than ever before. It is important to keep these factors in mind when planning your investments in equipment, machinery, or anything else that will increase your productivity.


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