Winter is Here: Cashflow Planning for Seasonal Businesses

Winter is Here: Cashflow Planning for Seasonal Businesses

February 6, 2024

Seasonal businesses, such as many of those in the hospitality and tourism sectors, face unique challenges in managing their finances through fluctuating periods of activity.

As specialist hospitality and tourism accountants, Linggard and Thomas deal with many seasonal businesses that experience revenue peaks and troughs throughout the year. For our clients, the key to managing these quieter periods lies in effective cash flow planning to ensure financial stability year-round.

Here are some handy strategies we recommend to help seasonal businesses navigate the quieter periods with confidence:


1. Understand Seasonal Cash Flow Patterns

First of all you will need to identify seasonal trends using historical financial data to understand your peak and off-peak seasons. For most tourism and hospitality businesses this will peak around the summer and school holidays with drops throughout the winter but remember to factor in drops caused by bad weather or other unexpected factors such as an economic downturn.

Ideally you will have regular cash flow statements automated via your accounting software or from your accountant to help identify potential shortfalls and allow for interventions.


2. Effective Revenue Management

Many seasonal businesses look at diversifying their income sources during off-peak seasons. This could include discounted pricing, hosting events such as weddings or birthday parties, or adapting your services to appeal to a different market segment, such as by encouraging locals rather than tourists to use your products or services.

Many seasonal businesses now offer special deals for local residents throughout the winter, a great way to both improve your reputation locally and to maintain a steady revenue stream in quieter periods.


3. Control Expenses During Low Season

Reducing your expenses during quieter periods is another way to improve the cashflow of your business. You can cut down on costs by adjusting staff hours, minimising utility costs, and pausing non-essential services or subscriptions. Many seasonal businesses manage staffing costs by having a core team of year-round salaried staff with temporary or agency staff helping over the peak sales periods.

A good part of the planning phase for this would be to understand the difference between fixed and variable costs. Fixed costs are those that don’t change (such as rent, insurance, fixed salaries and utility bills) whereas variable costs change depending on output (such as buying stock, temporary staff salaries and marketing). Making sure you have enough cash to cover your fixed costs even in lean times is vital for any seasonal business.


4. Build a Financial Buffer

Another useful way to plan seasonal cashflow is to utilise profits from busier periods to create a reserve fund for leaner periods. This will act as a financial cushion giving you have peace of mind when your cashflow slows down.

If your business has to allocate profits elsewhere, consider financing option such as lines of credit or short-term loans that can help bridge cash flow gaps during off-seasons, whilst always ensuring the interest repayments aren’t going to cause you problems further down the line.


5. Embrace the Off-Season

It’s important to not panic when business inevitably quietens down. Many staff members will have worked more hours during peak season so they will appreciate having a less hectic workload in the off-season.

That’s not to say there isn’t anything useful to do that can benefit the business financially. You can use quieter periods for strategic planning, staff training, stock taking, and making improvements or renovations to your premises. This investment can pay off by enhancing your business’s appeal and efficiency for the next peak season.


6. Stay Informed and Keep Planning

Keeping abreast of market trends and financial management practices is important for any seasonal business owner. Attend workshops and webinars to improve your knowledge and make sure you have a good grasp of common financial terms and modern cloud accountancy platforms such as Xero and Quickbooks.

Working with financial advisors or accountants that specialise in seasonal business finances will mean they understand the unique challenges you may face along the road. At Linggard and Thomas many of our seasonal business clients opt for our management accounts service, which is a set of important financial reports that outline the financial health of your business and empower your business decisions going forward.


Seasonal Business Cashflow: Hope for the Best, Prepare for the Worst

Navigating the ebb and flow of a seasonal business demands strategic financial management. By following these tips you can build a more stable footing for your business when the quieter times inevitably come around.

Remember, the key to successful cash flow management in seasonal businesses lies in preparation, adaptability, and continuous learning.

If you need any help with cashflow planning for your seasonal business or any other accounting or bookkeeping needs, please get in touch with the team at Linggard and Thomas today.

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