Most businesses carry certain periods of seasonality. What does this mean? It means that possibly the first quarter of the year is slow – from January to July and then picks up or the kind of business you do comes to almost an abrupt stand still as November and December comes around. Does that sound like yours? Does it create financial stress when this occurs? Well, if it does, there are several ways that you can eliminate financial stress in your business.
Budget Plan and Review
Make sure that you have a company budget, which is implemented ad planned for the whole year. Be sure to stick to the budget. Each month, you should review the budget. In your budget, you should incorporate a financial plan in how to handle the seasonality of your business and how the overall revenue will cover the cost for that period. Your balance sheet should project the fixed costs to run your business and the total overhead expenses. Not only should you have the standard budget plan, but also a budget for when you could break even. This will allow you to see if your business is underperforming and make concession for it.
Cash Flow Forecast
It is important to forecast your short term cash flow. Maintain a projected cash flow of at least ninety days. You would base this off of the existing payroll, revenue forecast for the period, receivables, and other items. Make sure that you do a weekly update and review with your management team. This is a great way to reduce financial stress in your business.
You should always have a financial plan to cover for your cash shortcomings. In some businesses, there is enough money at the start of the year to handle any shortfalls of the future months. However, it is best to determine and establish the amount of cash flow that will be needed and have a line of credit handy to cover your tracks. If your company’s track record is desirable, your bank will not hesitate to loan you money to get through the tough season. However, you must have a financial plan to see whether you are going to need the help and how much help will be needed.
Maintain Core Competency
There are just some things that you should try to maintain in your business and that is core competency. You don’t want to deviate from that and cause irreparable damage to your reputation as a business owner; just to make a few extra dollars. Embrace the fact that your business is seasonal at certain periods of the year. Combat this with proper planning and budgeting. These are more effective ways than diversifying.
The Bottom Line
The important thing is to understand the nature of your business. Let budgeting and planning be the focus from the moment you decide to go into business. The more you exercise your right to understanding the business, budgeting for shortfalls and plan for a rainy day, the more you will reduce financial stress during seasonal times.