Knowledge Center » Blog » ForwardAI Predict » Managing Cash Flow for a Seasonal Business


Cash flow is difficult enough to master on its own, but your business is different than the usual — it’s a seasonal operation. This makes cash flow all the more vital to the livelihood of your company since money’s only coming in during certain times of the year.

Of course, yours isn’t the first business to operate on a sporadic or seasonal basis. Because others have gone before you, plenty of tips are out there so you can be sure you’re really harnessing the power of your cash flow. Plus, you have the power of ForwardAI Predict on your side — we know how to help you manage your cash flow for a seasonal business.

Here are seven tips for managing cash flow for a seasonal business:

1. Set up a line of credit

Regardless of your cash flow, you never know when your operations will require even more money than expected. That’s why you should always apply before you need it — you won’t want to scramble when you realize you’re in a pinch. Especially because banks won’t be thrilled to lend to a company that doesn’t have cash coming in at its current juncture. Apply now to prepare for whatever may happen.

Once you’ve taken all the steps to set up your line of credit, you’ll be much more adept at handling emergency situations, should they arise. Many companies will take out loans at this point to cover their bases, but beware — the interest rates on these sums might be high. With a line of credit established long before a do-or-die moment, you’ll probably have much more reasonable repayment fees. It’s simply a smart tool to have at your disposal.

2. Put invoice factoring on your radar

Sometimes, even with the best planning, a cash flow crisis can happen. You made a huge sale in the busy season and dipped into your resources to do so. Now that things are slowing down, the payment still hasn’t come in. If you need a solution that’s faster than applying for traditional loan or line of credit, consider invoice factoring to help manage cash flow for a seasonal business.

Invoice factoring helps you turn unpaid invoices into funds by letting you sell your invoice to a factor (lender), who, in turn, pays you a set percentage of the invoice. You receive the balance, minus fees and interest, once the customer pays the invoice.

3. Audit your expenses

To make the most of your cash flow for a seasonal business, you should scrutinize any and every expense required to sustain your operations. Even though much of your money will, indeed, be necessary to spend, you might find little places where you can trim the fat. Something as simple as an online subscription service for $15 a month that’s left to renew during the off-season automatically can add up to a sizeable — and worthless — expense.

You might have to reconsider the size of your staff and their location, too. Renting a space for an entire year that you don’t need or keeping employees on the payroll even when the season’s over will add up. At a certain point, you can’t justify it — even if your business is staying afloat.

4. Diversify your offerings

Your seasonal business is fruitful, but the off-season is tough. Perhaps there’s an answer to your problem in the form of a complementary product or service that will appeal to your customers when you usually are unable to work.

Think about it — cruise ships sail south for summery escapes to the Caribbean, but they also voyage north so passengers can see New England’s changing leaves or icy Alaskan landscapes. Bustling resorts become locations for company-wide retreats, attracting business year-round with discounted rates to host conferences in the off-season.

Of course, not every operation will have a clear seasonal opposite that will also bring in money. In that case, brainstorm to see if you can come up with something unrelated, but economically viable. However, it’s best if you can use your pre-existing resources and team, so try not to veer too far from your initial business plan.

5. Build an emergency fund

We’ve already discussed why you should open your line of credit ASAP. At the same time, start building your emergency fund now, so you have cash available in tight spots. Industry experts tend to suggest an emergency fund with at least one month’s worth of operating costs. Don’t be too optimistic about the amount of cash you’d need in such a situation, either — it’s better to be overly prepared than ill-equipped for a drought.

There are plenty of tips for entrepreneurs building an emergency fund — something as simple as gathering coins in a jar can add to your cash flow for a seasonal business. Of course, more substantial efforts like working with a financial advisor or using online tools to tally up your stockpile will make more of a difference. No matter how you do it, setting this money aside and considering it untouchable in your mind is the key to having funds when you need them.

6. Use downtime to your advantage

Another way to maximize cash flow for a seasonal business is to look at your downtime in a completely different way. Rather than putting your feet up and coasting until the high season resumes, improve your skills and business acumen.

For many entrepreneurs, this means taking classes and enhancing knowledge, so it’s no longer necessary to outsource those tasks that keep your business running. For example, you could sign up for a video editing course and start making your own online marketing clips, rather than hiring a team to film and create content for you. Training your employees to do more can improve turnover rates and boost their sense of accomplishment, among other benefits.

Another way to slash costs in the interim is to do your research. Reach out to different suppliers to see if you can find someone who will give you what you need for less than what you’re paying now. Then, you can even try renegotiating existing contracts with this knowledge. You have nothing but time during the off-season — use it to your advantage.

7. Know your cash flow

No one is more familiar with the inner workings of your business than you. Implement the any of the tips above to your best judgment or come up with other ways to save cash in your off-season.

Whether your managing cash flow for a seasonal business or any business, cash flow forecasting is an invaluable tool. It gives you insights into exactly how and when money is coming into your business or flowing out to cover expenses. It will also help you more accurately identify the timing of your peak income periods.

The more you know about your cash flow, the better you’ll be able to manage it. This is the main reason we created our free cash flow forecasting tool. You work hard and we work hard to give you the tools you need to keep your business healthy.

Discover our cash flow forecasting and other cash flow management tools today.

This article is informational only. It does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.


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