With a brand new year upon us, getting your company in shape for success begins with cash flow. For any business offering seasonal services, such as construction, home remodeling, or landscaping, work slows down during the cold months. This makes cash flow planning especially important. If you don’t have a positive cash flow, you will have difficulty financing your operations, paying your vendors, or meeting your payroll when business starts to slow down. 

The Importance of a Cash Flow Statement

You need to create a cash flow forecast each year. Review your financial statements from the prior year and your sales forecasts for the next twelve months to give you an idea of what your cash flow will be going forward. Now you will be able to look for potential problems. For example, you might have a large loan payment coming due during the same month that your business is slowing down. Or, maybe you have landed a big construction job beginning in April, and you need to order materials in February to ensure they arrive in time.

You Need a Cushion for the Slow Season

Figure out ways to cut down on expenses and generate more income to provide you with a comfortable cushion when business slows down. Here are some tips:

• Every month, set aside some cash dedicated to the slow season.

• Examine your monthly expenses to see what could be reduced or eliminated.

• Approach your suppliers to see if they can give you more credit when things slow down.

• If you have late payers or non-payers, try to obtain partial payments or offer payment plans.

• Think of ways to quickly produce some cash from your best customers. For example, you could request partial payments or deposits for upcoming projects.

• Provide special deals on services such as end-of-season maintenance or pre-season inspections.

• Expand your services. For instance, your lawn-care customers might need snowplowing or driveway-clearing. If your business is outdoor landscaping for commercial properties, consider providing and maintaining indoor plants for their offices.

Use the Right Financing

If you need working capital to see you through a three- or four-month slow season, don’t take out a long-term loan that will involve you in making loan payments over several years. Look for a short-term loan or alternative financing methods such as accounts receivable financing or a business line of credit. If you need financial advice, book a consultation with Orcutt. Our experts will show you the best way to get through your slow season and be in great shape when business picks up again.