Learning & Insights

Managing seasonal cash flow

Seasonal fluctuation is a fact of life for most small businesses, so it's important to manage your cash flow all year long to make up for the times when things aren't so busy.

Understand your peak times

The best way to manage your cash flow is to fully understand the "ebb and flow" of your business. Look at your past sales data to identify when sales are up and when they're down. If you're a newer business, research similar businesses to help estimate sales and expenses throughout the year.

Create a cash flow forecast

All businesses benefit from forecasting the influx and outflow of cash. When you use a cash flow forecast, you can effectively predict how much money your business will need monthly, and make informed decisions based on this information.

Review your forecast frequently, and make any necessary adjustments. As time passes and more data becomes available to you, your forecasts should become more accurate and easier to create.

Plan for variable expenses

Some expenses, such as rent and utilities, are fixed and easy to anticipate on a monthly basis. But variable expenses also need to be accounted for, such as annual insurance premiums, quarterly tax payments or months that contain three pay periods. Planning ahead for all costs will help you be more prepared when they hit.

Get a business line of credit

Sometimes unexpected expenses will pop up during the year. Maybe some equipment needs to be replaced, or you have a month where you don't reach your anticipated sales goals. Or you may simply have a slow-paying client.

Regardless of the circumstance, a business line of credit will help bridge the gap during these times—and usually at a lower interest rate than a credit card.

Consider alternative business opportunities

Ask yourself whether or not you can diversify your business during non-peak times.

For example, if summer is your busy season, is there something you can offer during the winter months to increase sales? Or, have you considered selling products and services online or outside of your area to broaden your customer base?

Making a strategy for non-peak times may help you to improve your cash flow and diversify your business.

Use temporary or contract employees

Hiring temporary or contract employees during busier times of the year is a great way to increase your financial flexibility. During slower times when sales aren't as significant, you can decrease your workforce. You may also choose to hire this type of employee to focus on some other aspect of your business, such as your online presence.

The bottom line

As you become more aware of seasonal fluctuations in your business, you can use and refine the above-mentioned strategies to help capitalize on the high times and weather the slow times. Your ability to adjust to these variations and manage your cash flow accordingly will go a long way toward helping your business reach the goals you've established each year and beyond.

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The information provided is not intended to be legal, tax, or financial advice. BB&T cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.

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