SCORE Small Business Blog

This is the fourth of four articles in a series about how you can better manage your seasonal sales fluctuations. In the first three articles we discussed Understanding Seasonal Sales Trends, Planning for Seasonal Sales and Marketing Plans to Manage Seasonal Sales. This last article covers How to Manage Cash Flow for Seasonal Sales.

Managing Cash Flow for Seasonal Sales

Cash really is king when it comes to balancing your inventory needs. The cash needed to stock up on your most popular seasonal items is a big consideration for most retailers.

Here’s a laundry list of ways you can improve your cash flow:

• Improve your cash flow by better managing your receivables and your payables. Simply, try to collect sales revenue earlier and delay paying bills by negotiating more favorable payment terms with your suppliers.
• Dealing with seasonal sales fluctuations often means dealing with cash shortfalls. You can smooth out your cash-on-hand issues by setting up a line a credit before you actually need it.
• Negotiate better payment terms with your suppliers. While you’re at it, make sure you receive credit for unsold products. This can smooth out cash flow issues for upcoming inventory replenishment.
• Talk with factors about setting up an accounts receivables loan. These lenders pay you upfront for revenues you’re expecting to receive later. Of course, they take a cut of the revenue so make sure you build that expense into your net forecasts.
• Identify other seasonal products and services that can carry you through the low seasons.

Keeping track of your seasonal sales trends is vital to managing your inventory needs. Not anticipating big sellers and coming up short can force you to lose out on sales that would have generated much need cash for future purchases. Spend too much on items that don’t sell well and you’re stuck with discounting those items later to move them out of your inventory. And deep discounting of items that aren’t selling well results in painful cash flow issues.

Another important consideration comes in fully understanding your forecasted sales projections in conjunction with your company’s overall financial projections. You should have a very good handle on your expected cash flow levels by developing a standard set of forecasts:  Sales, Profit and Loss, Cash Flow and Balance Sheet forecasts are all necessary tools, without which you’ll have a difficult time managing your cash needs.

Cynthia McCahon – Founder and CEO, Enloop.com After years of providing business planning and development services for private clients, Cynthia became acutely aware that many entrepreneurs struggled to develop accurate business plans and saw the need for a free tool like Enloop. www.enloop.com | Facebook | @cmccahon | More from Cynthia