7 Great Cash Flow Tips For Seasonal Businesses

If you are a seasonal business you will have unique issues around managing your cash flow. For those businesses whose income comes from the Great British Summertime, you’ll be looking to spread your summer takings over the leaner months. Other businesses may be gearing up for the Christmas season, and most likely have plenty of outgoings at the moment as you buy stock ready for the seasonal rush.

Research from Santander Corporate & Commercial suggests that 61% of UK SMEs are affected by seasonality, so you are not alone! Here are our top tips for managing your cash flow if you have a seasonal business:

1. Planning: Cash flow forecasting is essential for all businesses, but for a seasonal business it is critical. Surprisingly Santander found that smaller companies were less likely to plan for seasonality than larger organisations. 36% of those with annual revenues between £50,000 and £100,000 fail to prepare. A detailed plan combining your sales forecast, stock levels and business costs is the only way you can implement any financial strategy for seasonal fluctuations.
2. Invoice Promptly: Do you know how much money is currently owed to your business? Across the UK SMEs are currently carrying £39.4 billion in late payments! For any seasonal business it is imperative that you can bank what is owed to you and therefore invoicing should be a top priority. In fact it has been shown that invoicing promptly is more likely to result in a prompt payment; if your client receives your invoice while your business is still fresh in their mind, they are more likely to settle it than if you leave it to the end of the month.
3. Keep Stock Lean: Keeping large amounts of stock means your money is tied up in goods that are not earning for you. You may also be paying for storage facilities on top. Stock control will help you manage this as will sales forecasting, so that you can ensure your stock levels remain at an optimal level.
4. Negotiate With Suppliers: If you need to buy in stock or services then make sure you are getting the best possible deal. You may be able to drive down the cost of goods by negotiating a sale-or-return arrangement or discounts on bulk orders (although be mindful of your stock levels). Also try to come to a favourable payment arrangement, perhaps spreading payments over a period of time, or so that they fall during your cash-rich period.
5. Reduce Your Costs During Slow Periods: 1 in 20 UK businesses temporarily close during leaner periods. And these are not just small businesses; companies with a turnover in excess of 20 million are more likely to close to reduce costs. Whether this is appropriate for your business will depend on the structure of your organisation. However there could be other ways to reduce your spending during a seasonal lull; employing flexible or remote workers, reducing your overheads by working from home etc.
6. Short Term Finance: Invoice or supply chain finance is an option many small businesses use to bridge the gap between high seasons. Cash flow facilities can also be employed to pay wages and suppliers when income has decreased. Of course many businesses use credit cards to manage their seasonal dip.
7. Save For A Rainy Day: Of course we all know that we should be saving a percentage of our earnings, although how many of us do? Seasonal businesses can really reap the rewards of putting something aside in a business savings account during their high season, and using this to help them through the quieter months. If profits allow this is a much preferably course of action than taking out loans or finance.

You can keep up-to-date with our news and advice pages by following us on Facebook. Come on over and say hello!