Every business will likely face some ebbs and flows in its revenues that may result in a cash flow squeeze. However, some businesses have a greater seasonal skew than others. Think ski resorts, swimsuit suppliers, and homebuilders in the winter as examples. For them, managing cash flow presents greater challenges.
How to Manage Your Cash Flow
Seasonality is simply the imbalance in sales revenue compared to expenses in a given period due to external factors like weather, holidays, and lifestyle patterns. There are two keys to managing cash flow. First, it is important to identify and document seasonality as precisely as possible. Secondly, it is critical to monitor cash flow carefully.
Use these nine tips to help manage cash flow in the face of seasonal fluctuations. Especially when you have lower revenues and higher expenses.
• Create a budget that factors-in seasonality. Including a realistic cash flow forecast. Keep cash flow projections updated.
• Carefully monitor all expenses. Find ways to reduce costs.
• Extend and delay payments to suppliers while avoiding late payments.
• Take actions to speed up customer payments by invoicing immediately when products or services are delivered. Follow-up when payments are due. Offer incentives for early payment. Offer multiple (and convenient) forms of payment.
• Create and maintain a cash cushion.
• Manage price and discounting so you aren’t selling at a loss.
• During busy seasons it is important to accelerate marketing to generate sales. That will help bridge the slower sales periods.
• Find additional ways to generate sales. For example, developing alternative streams of income, bundling products and services, creating back-end products or services, encouraging repeat business through loyalty-enhancing means, and pre-selling products or services.
• Make sure to line up financing to provide the support that will carry your business through soft periods.
Seek Expert Financial Assistance
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