Managing cash flow and adequate financial planning are important in any business, and every business has seasonal peaks and low periods. Seasonal businesses that do most of their business during one season and may even close at another time of year need to take extra care when creating a reliable financial plan to help carry them through the low season. Christmas is a slow period for many businesses (aside from retail of course!) as companies close for the holidays and customers take to their homes to spend time with family – so what better time of your to look at some useful cash flow tips?
There are various ways to create a financial plan, and depending on your business, whether your business operates for 12 months every year or it is closed for part of the year, your financial plan should be customised to your business. Consider the following tips when creating your business’ financial plan.
Cash flow management
1. BUDGET FOR YOUR FUTURE
Running a seasonal business means that you already know that some of the time, you will have more money coming in, while other times there will be less coming in. Budget yourself, and always plan for the future by looking at either your own financial history, or research from other companies. Understand your fixed and variable costs, and know when you can cut back on variable costs. Make a potential forecast, budget your spending accordingly, and save enough to cover your expenses at the low points.
2. USE YOUR OFF-SEASON TO GROW
If you know that you have a low season, you will have both less work to do, and less money coming in. Instead of taking a vacation or twiddling your thumbs waiting for business to pick up, take the time to strengthen your business. Work on your marketing plan, build a financial plan, try new products or services that might help your business bring money in during the low season, or take classes to increase your know-how.
3. MAINTAIN YOUR CREDIT
No matter how much planning you do, there is always the chance that you may need to take out a loan. Make sure that you pay your bills on time, keep open lines of credit, and do not build up a large amount of debt, especially during your high season.
4. BUILD RELATIONSHIPS WITH SUPPLIERS
If you are trying to save money on purchases, find one company with whom you work well. Pay your bills on time, and ask about discounts for buying in bulk. You can also negotiate the terms of your payments with suppliers. Rather than paying a lump sum, try arranging a payment plan with a supplier.
5. SIMPLIFY YOUR INVOICING PROCESS
Make sure that your invoicing process includes a partial payment up front, or that you don’t send out products until you have received payments. Minimise the risk of giving out free products or services to your business by planning ahead.
6. INCENTIVISE ON-TIME PAYMENTS
Similar to building relationships with suppliers, if you have loyal customers, offer rewards for things like paying bills on time or early, loyal purchases, or buying in bulk. Maintaining your customers is just as important to your business finances as is saving money on your expenses.
7. OUTSOURCE OR FIND GREAT SOFTWARE
If financial planning is not your strong point, it is important to hire someone who excels at it, outsource your financial planning, or find a DIY financial planning software that can simplify the process for you. Software like the Exo Finance – Core Module allows you to run your business’ finances, accounting, stocks, analytics and performance, and more, even remotely.
8. CONSIDER LOANS CAREFULLY
If it comes down to it, and a loan seems like the best option to cover low periods of cash flow, discuss your options with a financial planner, and know what your loan is for. Make sure your loan fits your financial plan, you will be able to pay it off in the high season, and that you stick to a budget or use financial software to help you control spending, collect balances due, and maintain relationships with both clients and suppliers.