Maintaining a healthy cash flow can be a challenge for every business, particularly if you operate in seasonal cycles. It’s one of the most commonly mismanaged elements of running a company, so here are five tips to ease the cash crunch.
Cash flow is the lifeblood of every business, which is why seasonal firms must govern their books wisely and plan ahead. Three month forecasts don’t offer a detailed enough picture of the road ahead, whereas annual projections offering a far more in-depth insight into the challenges you may face during cash rich and cash poor periods.
- Build a cash buffer
As a business you should ideally have a large enough financial reserve to keep your company afloat for a minimum of six months. It will also help to prepare for any unexpected dry periods.
- Generate additional income
Additional sources of revenue can offset the impact during a quieter period, so try extending a peak sale, introducing a new promotion or adding a new product line or service.
- Smarter invoicing
Late payments are one of the biggest issues that businesses face, with the total outstanding recently topping £26bn. A well-oiled invoicing process will reduce the threat and maintain harmonious customer relationships.
Always be sure to invoice immediately where possible and offer multiple payment methods and even discounts for early settlements, to prevent cash vulnerability.
- Consider alternative funding
An additional line of credit could be the difference in keeping your business afloat by bridging the shortfall in cash flow during off-peak periods. Asset finance services, particularly refinancing, can help to release the cash tied up in physical assets, such as equipment or vehicles. This type of finance facility can also be tailored to the seasonality of the business to allow flexible repayments.
For more help and advice on managing seasonal cash flow, speak to our asset finance specialists today on 0333 343 7800.