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With the holiday season upon us, it’s time to bask in the glow of the firelight and think about the jolly old toymakers, reindeer groomers and industrious elves hitting their busiest time of year. Seasonal trends, like elderly relatives on the sherry, are largely beyond your ability to control. 5% of UK businesses close their doors at some point during the year to save costs, while 6% get stuck relying on credit cards to manage their seasonal fluctuations. 4% use business loans, 17% either take on or let go staff to cope and an enormous 30% of those affected use their invoice or supply chain to ride out seasonal downtimes. All in all, if seasonal trends are influencing your business then you need to have a strategy to deal with them.
A lot of this is going to come down to cash flow, and you can tie yourself up in horrific knots if you hit the wrong stage in your yearly cycle without good preparations. If you end up begging to the bank out of season and can't show that you planned for the downtime, you might find yourself on the Tiny Tim end of a severe Scrooging.
It's not just the lean phase of the year that can creep up on you, either. If you can't meet demand in your high-point months then your customers are going to look elsewhere next time. The best customer service email in the world won't help when you have to explain why that surfboard won't be ready until November or those Christmas decorations until April.
Here are some ways to stay on top of your cash flow when things get dicey:
Nail Down Your Invoicing
Late payment is murder on small businesses. The Forum of Private Business reports that over a million UK SMEs are currently owed money and having trouble getting it. There are a lot of reasons for this, but the sad fact is this is how cash flow crises are born.
Look and Plan Ahead
Don't fall into the trap of "averaging out" your cash flow forecast if you're a seasonal business. Learn to anticipate upcoming lean spots or times of dangerously heavy demand. Shuffle your activities to get ahead when those tricky times arrive, and make sure your back-up plan has a back-up plan.
Get the Most for Your Money
Cash flow is as much about the money going out as the money coming in, so look for ways to improve your supplier agreements. This needn't just mean cheaper rates for you. You might go for better payment terms, volume discounts or sale-or-return agreements on your purchases, for example. Try to spread out recurring expenses throughout the year so they don't all fall on you during your slow periods. After all, it's in no one's best interests for you to be late paying up.
Even if you're not a seasonal business, you can be hit by the seasonal hammer if you're relying on someone else who is. Delivery delays, either to you or your customers, can be painful and people away on their holidays have an awkward habit of not paying their invoices until they're back. Even the weather can trip you up, preventing you from completing scheduled work on time.
RIFT Accounting's quarterly management reviews are a big step in planning and managing your seasonal peaks and slumps. Put us on your Christmas list and let's get working on some New Year's resolutions for your business.