BusinessFinance

Cash Management Strategies During Off Season

Cash is like fuel to your business. If you run out of cash, your business will eventually stop. There are various types of businesses that experience off-season and when it becomes slower than the peak season.

Of course, when your sales drop, it will have a direct impact on your cash reservoir. Although your sales have declined due to lack of demand for your product and service, your expenses will continue like marketing, salary to your staff, energy bills, building rent, and the like.

It can be hard to meet such expenses when sales are not enough at a particular time. Problems may strongly grip you during the offseason. Although it can be a daunting experience, here are some ways how you can develop cash management strategies.

What is cash management?

Cash management is deciding about the careful utilization of money to meet all business expenses, so you do not run out of it before the sales season comes back.

Whether you are suffering from a slow season or off-season, you will have to be very careful about your business expenses. Now is the time when you have to ensure you are frugal.

What are cash management strategies during the off-season?

Here is what you can do:

  • Opt for flexible staffing

During the slow season or off-season, your workers have nothing much to do. To minimize your cost on salaries and wages, you should opt for a flexible staffing model. When you demand such workers, you can call them back for and rest of the days. You can let them go.

It does not make sense to have them appointed when you have no work for them. It will just cost you a small fortune. With a flexible staffing model, you can prevent money from going down the drain on their wages.

If your workers are not ready to come back or are reluctant to work in a back-and-forth environment, you can start hiring people just before starting the sale season. It is still a cheaper option than paying money to workers during the offseason.

  • Maintain a cash reservoir

As you know, you experience offseason once a year – in fact, you know those months when your sales are completely down – you should try to have stashed away cash for these months to meet your business expenses.

Expenses will not wait until your sales are up, so you must have enough cash to keep the ball rolling. Grab bank statements of past years to know how much expenses you incur during the offseason and then determine the average expenditure.

Make sure that you set aside that much money to meet expenses during the offseason. Try to have spare money in a cash cushion because you never know when your expenses go up.

  • Create a source of income during the offseason

You will have to be careful about your expenses during the off-season to ensure that you do not run out of money. However, just cutting back on these expenses will not be enough. You should try to find an alternative income source to allow more cash to come in.

You can think of taking out instant loan for unemployed with no guarantor, but this may not be an ideal option, especially when the sale season is off. This time you may struggle to pay off your debt.

Further, a lender will want you to have a steady source of income to ensure that you do not fall behind in repayments. This is why you should try to have an alternative source of income.

If you have a product that does not have demand in a particular season, you should introduce a product line for that season. In this way, you can stop your workers from letting go and save money in hiring every time.

  • Forecast as accurately as possible

As you know that your sales are down in a couple of months, you should have a forecast plan. Having it in advance, you will be able to plan for your expenses. You should try to make a plan for one entire year.

You will keep planning for next month at the end of the current month. In this way, you will have a clear idea of how much you have already spent out of what you have and how you have to utilize that money to meet your expenses when your sales are disappointingly low just because of seasonal impact.

By regularly updating the forecast, you will be able to anticipate cash shortages for months when your revenues are significantly low. For instance, you can ask your clients to settle your bills on time. Most of the time, cash shortage goes stronger because clients do pay invoices.

You can ask them to pay you as soon as possible. When you have all your bills paid in time, you will be able to pay your suppliers, avoiding late payment charges.

  • Have a backup plan

No matter how hard you have tried to cut back on your business expenses based on the forecast, you can still face severe cash flow problems during the offseason. Sometimes cash reservoirs may not be sufficient to meet your business expenses, which is generally because of backed-up account receivables.

This is why it is suggested to have a backup plan. Try to look for a financing option. The most suitable one is a line of credit. You can withdraw cash based on your needs when you wish. Once you manage to arrange cash, you can pay off the balance.

The bottom line

Managing cash smartly during the offseason is a big challenge, especially for startups. Try to have a backup plan to know where you turn to when you need an immediate injection of cash.

Forecast the need for cash beforehand and find an alternative source of income. The tips mentioned above can truly help you manage business expenses when sales are too little.

AnnaAdams

Ana Adam is a content writer, blogger and financial advisor. She loves share her knowledge by blog and social networking platforms. In-spit of it, she believes to grab the knowledge from news media that inspire to write, and helps in entertaining.

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