Summer is here, which means seasonal businesses -- landscapers, construction, food vendors -- that have been hibernating all winter are ready to make their revenue for the year. Cash flow is critical for any business, but for seasonal businesses in particular, well-managed cash flow can make or break your business. Here are some tips for the most effective ways to manage your cash flow this summer:
1. Manage your receivables
Collecting your accounts receivable is essential to managing your cashflow -- without it, you won't be able to make payroll, pay your bills, etc. Make sure you invoice immediately. Consider discounts for those that pay invoices early, or ask for down payments.
2. Create a cash flow projection budget
Using historical data, plan your revenue for the entire year. Consider which expenses are fixed throughout the year (rent, utilities) and which vary by season. When you have a clear picture of your revenue and expenses, you will be able to grasp how to best manage your cash flow throughout the year.
3. Negotiate payment terms with vendors
Talk to your vendors and work out flexible payment terms. Leave yourself enough time to collect on your own invoices before fulfilling your obligations to vendors.
4. Have a line of credit
It's incredibly common for businesses to secure a line of credit at a reasonable interest rate. This is a great option for businesses that project a cash flow crunch at some point during the year. It might be wise to secure a revolving line of credit for short-term needs. More details on RLCs can be found here
5. Look for other sources of revenue
Many seasonal businesses diversify and offer alternate services during their off season. For example, landscapers do snow removal, or CPAs might offer financial planning after April 15th. Finding new sources of revenue could greatly alleviate any cash flow concerns during off-peak months.
6. Research for expense management solutions
There are programs and software available to easily manage expenses. Expensify
are both great products to help you create organized expense reports. PEX Card
is another great expense management solution to simplify your expense reports, and eliminate reimbursement checks and petty cash.
With proper planning, your business can effectively manage cash flow for success year-round!