Chances are that while your customers are enjoying the season's slower pace, your business isn't benefiting from a summer slowdown.
"Although many people look forward to the warm weather and sunshine that the summer months bring, it's common to experience a summer slowdown in sales, which can negatively impact cash flow," says Bob Gauvreau, founding partner of Gauvreau & Associates, a CPA firm providing advisory, accounting and taxation services to businesses.
"If a summer slowdown isn't properly planned for, it could be detrimental to the long-term financial success of your business," says Gauvreau.
"From May to August, businesses contend with various slowdowns," says Sarah Spoja, CFO at Tipalti, an accounting software technology business. "Employees take vacations, and productivity takes a hit. Customers also become less available. There are also fewer sales-driven activities that spark business, such as trade shows."
Despite the inevitable summer slowdown, there are steps you can take to proactively plan and maintain a healthy cash flow for your company.
1. Save during the lucrative times.
"The most obvious strategy is to bank success when you're over-performing," says Spoja. "Simply acknowledging that the good times are not constant helps you ride the leaner times."
During the busy months when cash flow is positive, save for rainy days, adds Gauvreau.
"We suggest setting up an automatic transfer from your business bank account into a savings or investment account," he says.
2. Budget according to past performance.
"When it comes to adjusting the budget for slow months, we look at historical trend data, so we have a rough idea of what the cash flow situation will look like," says Jason Yau, vice president of e-commerce and general manager of CanvasPeople, which transforms photos into canvas style décor. "This information helps us plan accordingly."
3. Consider early payment options.
"If cash is tight due to longer net payment terms such as 45-day, 60-day or 90-day, consider talking with your customers about early payment, dynamic discounting or supply chain finance opportunities," suggests Spoja.
"Use these financing devices to get paid sooner in exchange for a modest discount," she continues. "Likewise, early payment programs may be worth employing if you have your own suppliers you need to pay to start or finish projects but want to maintain longer payment terms."
4. Request money upfront.
"Asking customers and clients for money upfront is a great tool for generating cash flow at any time of the year, but especially helpful during slower times," says Gauvreau. "When you ask for money up front, you bring in cash prior to having to make an investment in product or services."
During the slow periods of a business, push gift cards or gift certificates so that you can collect the cash up front and deliver on the sale of a product or service during a period when the business is steadier.
—Bob Gauvreau, founding partner, Gauvreau & Associates
5. Adopt a subscription or monthly payment system.
"If it's an option for your business, cash flow becomes more consistent when you move from one-time purchases to set monthly fees," says Gauvreau. "If you sell to customers on a regular and ongoing basis, fix a cost for the product and/or service for the year and set up regular and frequent payments."
"In addition to changing your cash flow equation in your favor and minimizing unpredictable income, a subscription or monthly payment system strengthens your relationship with your customers and reduces churn," says Spoja.
6. Create a backup financial plan.
"I generally don't recommend taking on debt to cover a summer slowdown, but it's a good idea to have an open line of credit if you're operating a business that doesn't experience steady returns," says Eric Powell, founder and president of RightPlan Financial, which provides financial planning and investment management.
"While having a credit line will provide cash flow in slow times, you should have a plan in place to repay the debt as soon as possible when business picks back up," says Powell.
7. Adjust financing requirements.
"If you're paying off a business loan, many financial institutions will allow you to modify loan payments to allow for reduced monthly payments during the slow periods and higher monthly payments during peak seasons," says Gauvreau. "By restructuring your financial obligations, you can smooth the cash flow of your business."
8. Hold a sale to help boost cash flow.
Get rid of excess inventory and improve cash flow by offering sales and discounts during the summer slowdown, suggests Gauvreau.
"Sales can generate a larger volume of transactions and provide a cash flow boost," he explains.
"We've found it works well to reach out to companies in your industry and offer to head up short-term joint sales ventures during the summer months," says, Paula Soito, CEO and founder of Arts Row, an American art and talent marketplace.
"Create a winning offer by structuring a 40/60 deal, where the other companies receive 60 percent profits in exchange for taking on the venture with you," says Soito.
9. Sell gift cards or gift certificates.
"During the slow periods of a business, push gift cards or gift certificates so that you can collect the cash up front and deliver on the sale of a product or service during a period when the business is steadier," says Gauvreau.
10. Implement new products and services.
"During the summer slowdown can be an ideal time to see how new products or services sell," says Yau. "This could also boost your cash flow."
11. Think long-term.
Planning and taking action now will help you during future times of summer slowdown.
"Create new marketing content and work on building up your prospect list," says Yau. "Doing this will give you a leg up when business picks back up, because you'll be ready to deal with client requests and prospects without any delays."
Also consider refining company operations during the summer slowdown so you can monetize even better the rest of the year, advises Soito.
"Clean out and revise filing cabinets, technology files, email lists, protocols and coursework," she says. "Get super SEO-friendly with your website and improve your site's responsiveness for mobile."
Read more articles on cash flow.
Photo: Getty Images
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