9 Ways to Help Manage Cash Flow During Your Slow Season

Even though summer is a slow period for many companies, there are ways to plan for and prosper during slower times of the year.
Getting Small Businesses Unstuck, Shafran Moltz Group
July 18, 2017

The summer tends to be a slow season for many businesses. Although sales can be down due to vacations or the seasonal nature of your product, your employees and vendors still need to get paid at the same rate. As a result, your company may want to find a method to manage cash flow and still prosper during these uncertain seasons of the year. It takes advance planning, which can include:

1. Reviewing Your Budget

Having a budget can help businesses plan for a certain level of sales during each month. Start with last year's results and change the expected monthly revenue based on any new investments or information for the current year. 

You may always want to monitor last year's sales by customer to see who purchases at this time of year.

2. Matching the Cash Flow

Based on the expected revenue results from the budget, your company can begin to manage cash flow. 

You can start by reviewing the monthly cash-flow statements available in your accounting system to determine what it was like at the same time last year. Add information from current payables, receivables, inventory turnover and the current budget projections to determine monthly cash flow.

3. Ask for Variable Terms

Since cash flow may be slower during a particular season, consider designing terms with your vendors that could change based on the time of year. 

Many companies use an interest-only bank line of credit during slower times of the year and then pay it off when sales increase during another season. 

For example, perhaps a company pays net-45 in the busier fall season, but net-60 during the summer. If these business cycles are well-known, then you may want to ask for them in advance.

At the very minimum, if payments are late, notify vendors so they know what to expect and can plan their own cash-flow needs.

4. Manage the Team

In order to keep manage cash flow in the company, employee vacations also need to be scheduled. This can include cross training, collaboration and delegation of tasks far in advance.

5. Get a Deposit From Customers

Projects that are started during slower seasons may require a deposit instead of the company's typical payment schedule. This means that in order to manage cash flow, more of the project needs to be paid up front than usual. If this works well with customers, it can be practiced all year long.

6. Invoice in Advance

Some companies speed up their invoicing process to customers during slow times. For example, instead of billing on a monthly basis, they may send invoices every two weeks to manage cash flow for when they need it the most.

Consider systematically billing your customers when the company's work is completed instead of tying it to when the customer fulfills their responsibilities or a certain time of the month.

7. Stockpile Cash

For these slow seasons, you may want to start building up cash reserves well in advance. You could delay or match any big expense investments to revenues for when cash flow is stronger. You can also see to it that your fixed expenses are met before any discretionary spending is made.

8. Manage Accounts Receivable (A/R)

Letting customers get behind in their payments isn't a great idea—especially during slow times of year. 

Consider setting up a process to manage the company's accounts receivable. Most companies may be able to pay on time if they are just asked and monitored.

9. Get a Line of Credit

Many companies use an interest-only bank line of credit during slower times of the year and then pay it off when sales increase during another season. But this takes careful planning so this debt does not become a permanent source of capital for the business.

Read more articles on managing money.

Photo credit: Getty Images
Getting Small Businesses Unstuck, Shafran Moltz Group