6 Cash Management Tips For Seasonal Business Owners
Business owners whose businesses have seasonal demand need to be more watchful of their working capital. This is because their business income experiences spikes and downturns at different times of the demand cycle. Hence, having the requisite finances for daily operations becomes more challenging. So, these tips will make you better-abled in managing your cash:
- Study Your Annual Working Capital Needs And Arrange For External Financing In Advance
The most important thing to do is to analyse your fixed and variable costs and calculate your cash needs during both slow and peak seasons. That way, you have a good idea about how much cash you need to set aside from the peak season to help your business maintain financial stability during the slow season. Your peak season profits should also be used to create a small fund, which can be used in case of emergencies. If, for some reason, you do not have enough profits in one season, prepare yourself to apply for external financing, like a working capital loan. These loans are customized to help you address your daily operational needs and ensure business continuity.
- Consider A Line Of Credit For Your Needs
Most seasonal businesses find it hard to maintain a sufficient amount of reserves. Without enough funds, it gets more and more difficult to keep the business afloat. Similarly, seasonal businesses also need a significant amount of cash in hand before the peak season, in order to restock their inventory. For both of these needs, a business line of credit is the most suitable option. It allows you to pay interest only on the amount of funds you utilize, and gives you access to a dedicated credit line that can be used whenever you wish to withdraw money.
Also Read : Flexi Business Loans Explained
- Hire Seasonal Staff During Peak Demand
Your regular staff may suffice during normal or slow periods, but the peak season is much more hectic. It may become necessary for you to recruit additional help, which is always better than overworking your employees. This way, you can serve your customers better and increase profits. Rather than increasing your costs by hiring more permanent staff than needed for the whole year, hiring temporary staff during your busy season will reduce the overall payroll costs.
- Diversify Your Services During The Off-Season
Diversifying your products or services during slow periods is an effective way of increasing revenues. You can try to offer alternatives that are related to your primary offerings and attract the same customers. However, be careful that this does not come at the cost of your main business getting compromised.
- Consider Different Means Of Saving Money
To reduce your expenses during the off-season, you can always close your place of business, or rent it out to another business. This will prevent you from wasting funds on electricity bills and other operational expenses. Another option is to slow down your payments. As long as you’re not late, making payments just before the due date can ensure business continuity. You can also use this time to analyse your business and come up with a better and more efficient business model.
- Offer Multiple Payment Options For Quick Payments, And Negotiate With Suppliers
During peak season, it is always a good idea to provide more than one payment option to customers. This way, they can select the one they prefer most and make payments quickly and conveniently, helping you maintain your working capital. Secondly, try bargaining with suppliers during this time for the best deals on stocks, inventory and other services. The more you save, the better profit margin you can expect, and the better shape your cash flow will be in.
Regardless of whether you are experiencing a slow season or a peak season, follow these cash flow tips to stay on top of your finances. If you need a little assistance, you can always opt for Working Capital Finance from Bajaj Finserv. It offers affordable Working Capital Loan interest rates and a line of credit for greater convenience.