Managing business cash flow can be a constant balancing act. This is especially true for seasonal businesses, where working capital can fluctuate dramatically from one season to the next. There are ways a seasonal business can maintain working capital throughout the year and avoid slow season shortfalls.
When you make the bulk of your annual revenue during specific seasons, it’s crucial that you have a budget in place that will preserve working capital and get you through the slow seasons successfully. This budget should include both fixed and variable expenses.
For example, the rent or mortgage payment on your business location is predictable from month to month. Your payroll will vary when you increase your workforce for the busy season and then pare it back when the season is over. All of this needs to be taken into consideration when planning your annual budget.
While it may be impossible to account for every variable when planning your annual budget, looking at last year’s expenses is a good place to start. This can help you set a more accurate budget for the upcoming year.
Whenever possible, structure your expenses to match your available income during each season. Expansion and equipment upgrades should be done when your working capital level is high. It is also important to remain disciplined and save some of the peak-season earnings to cover off-season expenses.
A business budget isn’t a once a year, set it and forget it plan. Your cash flow and the working capital you have in reserve should be evaluated monthly. This will allow you to know exactly where you stand financially and whether you need to make adjustments to your existing budget.
You also need to monitor your inventory. While you want to make sure you are well stocked during your busy season, as the season winds down you need you to get rid of any excess inventory. It should be marked down and sold. This will let allow you to increase your working capital and decrease your inventory costs, also known as carrying costs.
According to TradeGecko inventory costs are typically 20 – 30 percent of your inventory value. This is a significant percentage and reducing inventory will, in turn, reduce the expense of storing it. Inventory costs normally include warehousing, depreciation, insurance, taxation, obsolescence, and shrinkage.
During your slow season, there are a variety of things you can do in an effort to increase your working capital. In addition to keeping inventory at a minimum and reducing your workforce, it’s a good time to negotiate more beneficial terms with suppliers and customers.
Negotiate with suppliers to arrange to make payments during or immediately after your busy season, minimizing off-season expenses. Negotiate with customers to pay a percentage of their invoices upfront, reducing the gap between invoicing and payment.
If your efforts to get the partial upfront payment of invoices fails or you just need a little extra working capital now, factoring can be the perfect solution. Those unpaid invoices are assets which, by utilizing factoring, can be turned in to cash now, not a couple of months from now. Even the most well thought out budget can be disrupted by an unforeseen expense. Factoring can get your budget back on track and keep your business moving forward even in the offseason.
Capflow Funding Group will work with you to find the best funding solution to provide your business with immediate working capital. We service many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help grow your small business.
A small business owner often wears many hats. There’s always so much to do and there’s just not enough hours in the day, right? There are things you can do to help you check more tasks off your “to do list” and boost your productivity. If you’re finishing up each day tired, stressed and feeling like you should have gotten more done, it might be time to try a different approach. Check out these tips to help you make the most of your day. Try working a few of them into your daily routine. You just might be surprised at how much more you accomplish!
For many, the morning hours tend to be the most productive. The time between 9 am and noon has been identified as the period when mental alertness is at its peak for most people. With that in mind, it’s a good idea to get an early start on the day’s tasks and knock out a big chunk of them before lunchtime.
An early start won’t make much difference if you don’t have a plan. Some small business owners use planning software and others just make a simple list. Either way, planning and prioritizing daily tasks can significantly boost your productivity.
It isn’t uncommon for a small business to start out as a one-man show. Once the business grows and takes on additional employees, owners may have difficulty handing off some of their tasks to others and some owners just think it’s easier to do the task themselves.
While you may struggle with delegating, it is an extremely effective way to boost not only your productivity but your employees’ as well. Trusting your employees with tasks you would normally do can instill confidence and provide motivation. In turn, you will have more time for other tasks.
A large project can be overwhelming if you try to tackle it all at once. Divide it into smaller, more manageable tasks you can tackle one at a time. If possible, you may even want to delegate some of them. Rather than being weighed down by the entire project, you will feel a sense of accomplishment as each task is completed, motivating you to tackle the next one.
This can be difficult, especially with all the technology at our fingertips. Unless it is essential to what you are working on, refrain from checking out social media and constantly checking your phone. These distractions will break your concentration and could result in valuable time being wasted. You can also avoid distraction by briefly checking in with your employees at the beginning of each workday. That way you can address any concerns or issues they have then, potentially avoiding numerous interruptions throughout the day that will disrupt your workflow.
Growing a small business can be challenging, taking a lot of time and effort. These tips can help make it easier and more successful. Sometimes, business growth can require a little extra capital as well. Capflow Funding can provide fast, flexible funding to fuel business growth. Contact us today to see how we can help grow your small business.
