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Chris Bell

How to Manage Seasonal Cash Flow_3 Essential Tips for Small Businesses



The issue of seasonal cash flow is one that affects almost all small businesses the world over. During the highs, cash flows ferociously like a river during the rainy season, but during the lows, that river is equivalent to a stagnant pond. It is at the latter junction that funds become highly susceptible to mismanagement.

If you are a small business owner that sees seasonal cash flow, then you are well aware of the on and off seasons. There are many strategies you can implement to make sure the cash keeps flowing when the season takes a downward turn.

Here are five essential tips to keep that river of cash flowing all year.

  1. Know when it is peak season 

For a business to succeed, it needs to have a clear understanding of when it can expect a high influx of cash and when it is expected to slow down. This is called a cash flow forecast and needs to be as realistic as possible to avoid any overestimation of expected revenue or underestimation of expenditures.

If your business has been running for some time, you can look at past sales records over a period of 1-2 years. From there, you can determine the cash inflows and estimate the outflows. After that, it is just a matter of putting it all together to create the cash flow forecast.

For a new business (less than one year), it can be tricky. However, this data can be obtained by looking into competitors.

  1. Consider getting a business cash advance 

According to research conducted by the Great British Awards, 85% of seasonal businesses in the UK need additional financing to make it through the off season. The results are indicative of the struggle that small businesses face when they depend on seasonal cash flow. So as the percentage shows, there is no shame in taking out a loan to beat the seasonal lull.

However, not just any loan will suffice. Getting a traditional business loan means subjecting yourself to fixed payments, which don’t account for seasonality. Whether sales are high or low, you are required to make the agreed-upon payments or incur penalties for late loan repayment.

Seasonal businesses need a financial product that is more flexible than this, such as a Merchant Money cash flow loan. With this types of investment, you pay as you trade until you cover the entire loan amount. If sales are low, so will be the payments you make and vice versa – no need to worry about fixed payment terms.

  1. Proactively minimise overhead during the off season

If shutting down is not an option during the seasonal lull, you can do many things to reduce expenses. These include lowering the amount of staff or making sure all bills are paid on time to avoid any late payment penalties (this should be done in the peak season as well).

Cutting down unnecessary expenses is vital to making sure there is enough cash reserved when customers stop coming (this is expected around winter). When cash stops pouring in, that’s when small businesses need to be extra frugal to survive.

Every business faces a period during the year when cash flow is at its lowest, making it easy to mishandle the available funds. It is better to put up effective and creative solutions that will see you through the off season and hopefully even create new cash flow opportunities.