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You don’t have to operate a Halloween outlet to be at the mercy of seasons. Whether by design or circumstance, every business is seasonal to some degree, which presents some of the most challenging variables in forecasting.
Seasonal influences on cash flow can hide anywhere, so it’s important to understand the unique rhythms of your industry, your customers, and your suppliers. Consider these two most common areas of variability:
Companies that don’t plan ahead for cash flow fluctuations risk suffering shortages during slower months. Take these five steps to navigate the challenges of seasonality in your business:
> Pinpoint Problem Seasons. Based on your accounting history, identify patterns and consider if (and how) your product or service changes in value based on temperature, holiday, or proximity to an annual event.
> Close the Gaps. Determine where your problems in cash flow occur and fix them. For example, if your sales are healthy but revenue is low because of unpaid invoices, consider increasing collections efforts or offering new methods of payment.
> Be Proactive. Manage the seasonal highs and lows by planning ahead. For example, schedule in a decrease in stock during the off season and bank your peak-season surpluses in anticipation of that old equipment breaking down during a cash flow crunch.
> Get Creative. Use the slower seasons to inject new ideas into your business. Cultivate client relationships in fresh ways or think of innovative revenue streams that aren’t as vulnerable during that time of year.
> Pack a Parachute. Set up a self-funded account that you can access in a cash emergency and apply for a line of credit with your bank in case you need it.
Managing seasonal vulnerabilities by building a strategy ahead of time will ensure your readiness for whatever challenges the calendar throws your way.