If you’re not managing the on and off seasons of your business cash flow, you may be risking some major problems for yourself in the future (and maybe not-so-distant one at that). No matter what your revenue is for any given month, you will always have expenses that don’t wait for anything. That’s where seasonal cash flow planning comes in. You can project your total annual expenses and revenue (I know, not always the easiest thing to do) and spend and pay yourself accordingly. Here are some of the top ways to deal with seasonal cash flow.
1. Create a Cash Flow Projection
This is imperative. It’s the planning part of the process and can be re-evaluated at the beginning of each month if your business is unpredictable. The best part is, once you have completed an entire year you had done a projection for, you can use it to build a better and more informed plan for the following year with added growth goals.
2. Adjust Your Payment Collection
In the off-season, you should make collecting client payments a priority. If you have clients that continuously have late payments, you may want to adjust your leniency on late payments, but make sure this is something that the client is completely aware of and written in your contract ahead of time. Having a strong late payment and follow up procedure can take a little of the hassle out of this tedious part of business, and the follow up and reminder of the penalties the client had agreed to can be the gentle kick in the pants that they needed.
3. Product or Service Diversity
Seasonal cash flow issues can be your first indication you need to add a new product or service to your business model to fill in the gaps. A great way to decide what you should be adding is looking at what your current customer base may all benefit from. It is always easier and less expensive to market to current clients that attract new ones (especially if you have issues with cash flow!).
4. Strategize your Accounts Payable
Bust out the calendar and highlighter collection for this one! Planning out bill and vendor payments (especially in conjunction with collecting payments from clients) can be a game changer for your cash flow anxiety. Be careful not to push the envelope too much on this one as relationships can be affected, but just mapping out when you receive notice of payment and when the due date is can give you the clarity you’ve been search for.
5. Cut Back the Expenses
If you are a seasonal business, seasonal employees compared to year-round (even if they are only part time) can be a savior for your bottom line. Look into contractors that you can develop a relationship with where your visions and brands align. Another cut back can be only renting out a co-working spot during your busy time and saving that money in the off season, which can add up quickly.
To sum it all up, get a budget, know your numbers, and make a plan. Remember that plans are ever-evolving with your business growth and fluctuations so put in the work and stay on top of it to give yourself a solid foundation for success.