Examine the Trends
The first step is to closely examine your cash flow history and then identify and quantify your seasonal trends. Do some peak seasons hurt your cash flow more than others? How predictable is the timing of these changes? It’s important to have a full picture, with all the metrics you can generate, to find an effective solution. Taking a hard look at the past is often the best way to predict the future.
You must also find internal ways to increase cash flow during your low season, which can be done with discounts to increase sales or incentives to encourage early payment. Look at all the stages of your cash flow, from receivables to payables and inventory, and identify all inefficiencies and potential sources of cash flow.Identify which expenditures can be better timed to more closely match your cash flow seasonalities.
Look at your working capital holistically including all of your finance options, from banks to credit cards, billing cycles to invoice habits. How fast after a sale do you issue your invoice? Just as timing is at the root of your problem, it can also be the source of a solution. Familiarise yourself with the billing terms of your credit cards and your supplier’s billing cycles. Initiatives on adjusting billing cycles, customer terms and prepayment amounts can go a long way to addressing your problems.
Managing your company’s cash flow in a seasonal industry is a task that is just as important when cash flow is high than when it is low. Do not ignore or push this issue aside with a temporary emergency has past. The best time to solve these problems is when you are not under extreme pressure to do so.