Seasonal Business Blues
July 25, 2016
There are three driving forces behind every successful business; cash flow, credit and creativity. Those forces take on even more importance when it comes to a seasonal business. Here are some helpful tips to use in improving your current business or starting a new one.
First, know the numbers. Seasonal businesses are tough, and their owners must be tougher with a thorough knowledge of their business financials. Being able to manage finances accurately and effectively is crucial. Considering the income fluctuations of a seasonal business, it’s imperative to have a firm handle on cost, as well as knowing when to tap into credit and when it makes sense to ramp up or reduce activity based on objective numbers.
Second, keep cash flow current. Having a small business it is important to know the key financials and how to keep your cash flowing. Of course, if you don’t know what’s coming in and going out down to the penny, you need to take action to fix the situation with a good accounting system, or hire an accounting firm to do it for you.
In addition you’ll need a quick and efficient invoicing system, so you can easily keep track of which clients are current on payments and which ones are falling behind. This information can help you quickly identify and rectify situations that may put a squeeze on your future cash flow.
Third, expand your demand. When your off season comes around that is a good time to take a look at your business. Look at ways to improve your business to your current customers and look more appealing to new customers. Take a look at your current products or services and consider ways to grow interest in them; or consider what complementary items/ services you could introduce to attract new clients.
Forth, control your use of credit. Not all cash flow and seasonality influences can be controlled and that’s why it’s essential to keep extra cash on hand to cushion any unexpected blows to your business. A credit card or line of credit is one way to bridge a cash flow gap, especially if you are just starting out and not eligible for larger bank loans. However it is important to not get in over your head. Developing a good financial plan will help you with that.
Finally, it’s important to take a long view of your seasonal business. Although your business may operate only part of the year, it’s important to think about it as a 12-month operation. This will ensure that you not only plan ahead for new opportunities and maximize existing ones, but that you also set aside enough cash to pay any overhead costs that exist even when your business is in its off season.
If you are wanting to start a new business or improve your current business please call Compton Accounting and we will be happy to help you 844-484-8881.