When your small business is seasonal, it’s essential to properly manage your cash flow. Follow these 6 tips to help avoid cash flow problems all year long.

Whether you sell Christmas tree ornaments or prepare tax returns, your small business has highs and lows throughout the year. Proper cash flow management can be make-or-break for your business, even if you’re well established. Follow these tips to help avoid cash flow problems throughout the year and continue to grow your business.

#1: Accurate cash flow forecasting

First and foremost – creating an accurate cash flow forecast is essential to helping you predict and prepare for seasonal concerns. Whether you use robust accounting software or a spreadsheet you made yourself, take the time to forecast cash flow for the year.

Start by predicting your income, whether it’s on a weekly or monthly basis. If you’re a completely new business, this could involve some guesswork, but doing research into industry standards will help you come up with an estimate. Be sure to factor in any seasonal trends that may already be obvious to your company or region. If your business is more established, combine performance from past years with any relevant industry predictions, as well as any plans you already have for the year that could boost income. Remember, as you’re predicting cash flow, monitoring income and expenses don’t always tie directly back to cash. You may not get paid as soon as bills are sent, and likewise expenses may not get paid right away.

Next, tackle expenses. While past costs and industry standards will be helpful here as well, you should be able to predict some upcoming variations more easily. For example, if you’re planning to switch vendors, run a promotion, or hire additional staff in the coming year, take that into account. Be sure to consider everything that goes into these expenses. For example, you’ll have an initial marketing expense for a promotion, but you also may have to purchase more inventory to account for the increase in demand.

Finally, be sure to update your cash flow forecast on a regular basis. If you make a big change, or see sales performing differently than you anticipated for the year in either direction, be sure to update your forecast starting with the next month.

#2: Consistent account reconciliation

Even if you have a well-planned forecast, if you’re not regularly reconciling your accounts, you can run into cash flow problems fast. Make sure you aren’t letting this important habit fall by the wayside during peak seasons. If you’re having a hard time with cash flow management, reach out to other small businesses or a trusted banking partner for advice on how to catch up.

#3: Improve vendor communications

Building a good relationship with your vendors can give you additional flexibility to weather seasonal trends. Some vendors may even be willing to adjust your payments, allowing you to match your cash flows.

#4: Budget for seasonal fluctuations

Using your cash flow forecast, try to predict how much money you’ll need to cover payroll and expenses during quieter seasons. Then make a plan to set aside enough each month, preferably with a cushion, to prepare for any potential seasonal cash flow problems. You could also use fruitful seasons to improve your cash flow and reach new customers, which may help sustain you through the rest of the year.

#5: Plan to reduce expenses during seasonal dips

Not sure if budgeting for seasonal cash flow fluctuations will cover it? Then you might have to make some cuts. Look for ways you can reduce expenses, beyond vendor negotiations, during your slow periods. It could mean making your staff seasonal, or operating for fewer hours.

#6: Find flexible lending options

It’s better to be proactive than reactive when it comes to managing seasonal cash flow. Finding a flexible lending option, such as a business line of credit, will help ensure that you have access to funds when you experience a slow period. Plus, there are many ways to use a business line of credit beyond covering cash flow shortages, such as marketing campaigns or to purchase inventory. Apply for a business line of credit before you need it, so that you don’t have to worry about any processing times and can access it right away.

Santander Bank does not make any claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in this article. Readers should consult their own attorneys or other tax advisors regarding any financial or tax strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.

Equal Housing Lender. Santander Bank, N.A. is a Member FDIC and a wholly owned subsidiary of Banco Santander, S.A. ©2017 Santander Bank, N.A. All rights reserved. Santander, Santander Bank, and the Flame Logo are trademarks of Banco Santander, S.A. or its subsidiaries in the United States or other countries. All other trademarks are the property of their respective owners.

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