Cash flow is crucial to the success of all businesses. But it is particularly important to small seasonal businesses as due to the fluctuating nature of their business, they need to be even more vigilant about managing cash. If you run a business that has seasonal highs and lows, take a look at the following steps you can take to ensure you keep a close eye on your cash flow and ensure you have enough money to keep your business in the black.
Have a cash reserve
The most obvious first step to managing your cash flow woes is to try and ensure that you save up a cash reserve for your business. A small business with a cash reserve is a strong small business that has a much better chance of surviving into the long term than one without.
Forecasting and budgeting will help you see the ‘big picture’ and will help you to plan ahead and prepare for the variations of a seasonal business. Keeping a close eye on your incomings and outgoings is vital to keeping a handle on your business’s financial situation.
Offer your customers multiple payment options
Depending upon what sort of business you have, you may find it beneficial to offer your clients/customers a range of ways to pay you. The easier you make if for people to pay you, the more likely they are to pay. For example, think about offering options such as Paypal.
Diversify if possible
Is it possible for you to diversify your product or service? Diversifying your revenue streams can help to negate the effects of seasonality. For example, a landscaping or gardening business could add services such as snow clearance during the winter, or a hotel may concentrate their efforts on conferences and events outside the busy summer months.
Think about offering staggered payments
Not suitable for all businesses, but you could think about offering staggered payments for customers. Letting people pay a deposit and stagger payments could encourage people to buy your product or service early and this money could help see you through the quieter periods.
Think about alternative sources of finance
If you’ve been turned down by your bank for finance, then you could look at alternative sources of finance to help you over the quiet periods of your business. These include equity financing, peer-to-peer lending and loans from friends and family.
Consider invoice discounting and factoring
By far the most straightforward way of solving your seasonal cash problems. If you have cash flow issues, this can be exacerbated by customers or clients who are on longer payment terms than normal or those that always tend to pay late. One way to regulate this is to look at invoice factoring and invoice discounting. These enable you to access the cash from your invoices immediately, all for a relatively small cost. This can provide you with an instant cash injection into the business which could be vital during a quiet period. Used regularly, it can help you to ensure you have a healthy cash flow throughout the year.
If you would like a free, no obligation chat about invoice factoring and discounting, call Factoring Solutions on 01827 707680 now.