We’re headed into the busy season for many Kandiyohi County seasonal businesses. Whether you’re planting crops, mowing lawns and landscaping for your customers, laying concrete, building homes, or other construction, steady cash management ensures your business can weather the off-season and thrive long-term.
Implementing a cash flow management plan now, during your busy months, can set your business up for success all year round. Let’s explore a few practical strategies to help you manage your cash flow this year.
Understand Your Cash Flow Cycle
The first step in managing your seasonal business’s cash flow is understanding your seasonal income and expense patterns. Look back over your financial records for the last few years. When did your income peak? When were your leaner months? What were your in-season and off-season operating costs? What were your fixed and variable expenses?
Use this data to create a 12-month cash flow forecast that includes your low and high income periods, fixed expenses, variable expenses, and your off-season operating costs, such as your insurance bill, equipment maintenance, and marketing. Your forecast will help you anticipate future years’ income and set aside funds to cover your off-season expenses.
Build Up Your Cash Reserve
With your cash flow forecast in hand, you’ll have a better idea of how much cash reserve you require to make it through the slower months. Think of a cash reserve as your financial safety net. It is what will keep you afloat when work stops or slows down during the offseason. You can also use it to pay for operating expenses during the winter months, such as vehicle storage, insurance, and employee retention.
Consider Adding Off-Season Services
Many seasonal businesses make most of their money from April to November, but provide complementary services December through March to bring in additional income. Landscapers may offer snow removal or holiday lighting services, or summer fishing guides may offer winter ice fishing tours.
Manage Inventory Wisely
Excessive inventory can be a real cash sink. Instead of tying up cash in backstock that may sit idle during the off-season, take a look at your past purchasing. Use whatever trends you uncover to guide your future inventory purchases. Look into just-in-time inventory management to only purchase what you need, when you need it.
Control Your Fixed Costs
Fixed costs can eat away at your monthly income. Consider negotiating your flexible contracts with vendors as you head into the busy season. You may also think about leasing equipment seasonally instead of owning it year-round. You can also control costs by using part-time or contract labor during your peak season.
Stay on Top of Invoicing and Collections
When you operate a seasonal business, staying on top of your accounts receivable should be a top priority. Get paid in full and on time by making your payment terms clear for your customers. Consider offering early payment incentives or automated billing. Lake Region Bank can help you set up ACH transfers with your customers so you never have to chase down a payment.
Make Off-Season Investments
When things start to wrap up for the year, take some time to identify equipment that needs to be upgraded or replaced. Invest in training so you can hit the ground running in the spring. Use the quieter months to develop and implement a marketing plan for your business to attract and sign up customers for the upcoming season.
Use Short-Term Financing Strategically
Short-term financing or lines of credit can help you bridge cash flow gaps, especially in the early spring when expenses ramp up before the busy season. Lake Region Bank offers seasonal financing options that we can tailor to your business and your needs.
Managing the cash flow for your seasonal business requires foresight, discipline, and strategic thinking. The Lake Region Bank commercial bankers are here to help you create a plan for managing your seasonal business all year long. For friendly, knowledgeable support, get in touch with our commercial team today.
