Managing cash flow can be a challenging part of running any business. When you operate a seasonal business, maintaining cash flow can be particularly tricky.
“Cash flow shortages can be the cause of business failure, even for companies that had great potential,” says Sarah Adams, vice-president of Small Business at RBC. “Planning for the ebb and flow of a seasonal business needs to be done early and often, before you find your business in a cash crunch.”
To help maintain cash flow throughout the year, Adams provides five tips:
1. Determine your cash flow needs.
Calculate your start-up costs, review your financial forecast for the busy season, and calculate your cash flow based on the entire year, including the off-season.
2. Budget carefully.
Creating and sticking to a solid budget is necessary to ensure you can pay for regular expenses such as maintenance, taxes and equipment financing when you have no funds coming in.
3. Establish good credit.
Having good credit is especially important for a seasonal business, so be sure your bills are paid on time and maintain your strong credit rating.
4. Consider financing options.
Talk to a financial advisor about an operating line of credit, business credit card, term loan, leasing, and business loan insurance.
5. Make use of the off-season.
After a busy season, owners may look forward to some well-deserved downtime. This is the best time to review the past season, plan any changes, and prepare your marketing efforts for next year.
More information is available at www.rbcroyalbank.com/business.