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Maintaining a healthy cash flow during off-season

How seasonal businesses can keep a positive cash flow during the off-season.

Being a seasonal business owner can feel like you’re on a rollercoaster: for some months your cash flow is riding high and others it feels like it’s plummeting out of control.

However, having a seasonal business doesn’t have to mean your cash flow falls flat in the off-season. There are effective strategies you can implement right now to help your seasonal business maintain a healthy cash flow right throughout the financial year.

1. Budgeting is key

First and foremost, you need to ensure you are budgeting for both your high and low season. Manage your cash flow carefully by running a cash flow forecast. This methodology shows your projected income and expenses for a set period of time, as determined by when you expect to receive payments, your likely sales and likely costs.  

You can then use this forecast to measure your budget against your basic expenses first, just like you would your own personal budget, such as rent, salaries, utilities, merchandise and shipping. If you expect that you may struggle to pay for some basics, you know to manage your business accordingly. For example, keep careful track of your inventory and any excesses you can mark down and sell for a profit in your off-season.

2. Outsource your outstanding invoices

If your cash flow becomes stagnant in the off-season due to unpaid and outstanding invoices, make a plan to get on top of this once and for all. This is where invoice financing can be a huge help for businesses struggling with seasonal cash flow issues.

Invoice financing is a type of business loan. There are two main types of invoice financing: invoice discounting and invoice factoring. Both types involve business owners being paid up to 80% of the value of their nominated outstanding invoices upfront. 

The former involves giving a portion or all of your outstanding invoices over to a third party for a loan, while retaining control of chasing up payment from your clients. The latter involves the third party having access to your full accounts ledger, and chasing up all outstanding invoice payments from your clients on your behalf.

Invoice factoring in particular may be extremely useful for some seasonal businesses – especially for owners who use their off-season to vacation or to focus on growth and planning. Not only will your cash flow get a serious injection of funds you’re owed, but you don’t need to waste hours and dollars chasing up unpaid invoices.

3. Utilise your off-season

Speaking of vacations, if you find your cash flow depleting in your off-season it may be worth skipping this year’s holiday and focusing this time on business growth. Utilise your off-season carefully so that next year, your business can come back even stronger.

Your slower period is the perfect time to strategise, plan ahead and even upskill your employees. Take stock of every strength and weakness you can identify from your on-season. What worked this year that you can duplicate, or even expand on for next? What perhaps didn’t work, and what can possibly be cut out or worked on to improve cash flow? 

Once you identify your businesses own strategic assets, take stock of your competitors. What did they do successfully or unsuccessfully? What can you replicate in your own products or services, or what mistakes can you avoid?

4. Ditch off-seasons altogether

Another way you can boost your cash flow as a business is to look into diversifying your products and services so that you no longer have an off-season. Think carefully about what your clients or customers may need in your off-season that you’re not already providing. 

Take a look at the marketplace and see what other competitors are doing as well for inspiration. For example, if your business started originally in helping customers with their tax each new financial year, you may consider moving into other areas within the financial services industry.

Look into areas that use similar equipment, materials or offer adjacent services that you offer. Using the same employees and equipment in your new business endeavour will not only reduce your overheads but make marketing this new model more palatable to your clients and customers. 

After all, if your customers know you as a reliable snow globe maker who suddenly expands into landscape architecture, they may not follow you on your new journey, and you’ll lose an already established client base.

If you think that your business can benefit from Earlypay's modern invoice finance facility and would like to find out more, please contact our team today on 1300 760 205.