Seasonal concerns for Small Business

Sunday December 10, 2017

In what we're reliably informed in song is the Most Wonderful Time of the Year, it's a good idea to spend a moment reflecting on the passing of the seasons. Most importantly, you want to consider what it means for your cash flow. Running a business means surviving the highs as well as the lows. If you can't meet your customers' demand or you've stretched yourself too thin, the end of the year can be a lot less festive than this year's crop of TV department store adverts suggest. About 1 in 20 UK businesses close up shop at some point in the year to cut costs. Others use loans to make up their financial shortfalls, or manage their workloads by hiring or letting staff go on a seasonal basis. The point is, you need to have a cash flow strategy to deal with whatever your yearly cycle throws at you.

Of course, the trouble is that you're not dealing with a completely predictable pattern here. Hitting your lean or busy period unexpectedly can send you dashing to lenders to prop up your business. Then again, by even doing that you're more or less advertising that you didn't have a plan for low ebbs or excessive demand. If you're hanging your Christmas hopes on traditional financing options, you might just find yourself Scrooged right out of business. You've got to think about how you appear to your customers and suppliers, too. Missing their expectations in your busiest months can be just as damaging if it means they have to go elsewhere. Chances are, they'll think twice before trusting you again, and you'll be stuck playing the Ghost of Christmas Might-Have-Been next year.

One of the main keys to surviving your seasonal roller coaster ride is to lock down the way you handle invoices. If you're a relatively small link in the supply chain, you might find your customers dragging their feet before paying up. Sadly, some businesses use late payment as a way of throwing their weight around. Others simply treat it as an interest-free loan until they're good and ready to cough up. You don't have to let yourself get trampled by your own customers just to stay on good terms with them. Debt recovery and invoice financing might seem like clumsy weapons to wield. When your survival's at stake, though, you shouldn't rule them out.

Don't assume everything will average out over the year if you've got noticeable seasonal fluctuations in your business. Learn to read the road ahead so you know when to ramp up your activity and when to pump the brakes. Take a step back and look where your money's going, instead of focusing on where it's coming from. You might be able to talk better payment terms out of trading partners, if you've kept up good relationships. If you've got fairly predictable recurring payments, work on spreading them out over the year so they don't all collide in a lean spot.

Finally, remember that cash flow's not just a problem for seasonal businesses – and the problems or delays your suppliers or customers are having can hit you just as hard as your own. RIFT Accounting's quarterly management reviews are designed to make planning and managing peaks and slumps as simple as possible. Get in touch, and make taking control of your cash flow your top RIFT Resolution for 2018.

Contact Us

Newsletter Sign Up

Fieldset legend