The rhythms of seasonal trading
In the UK, seasonal trading is closely tied to the calendar year, various cultural events and of course the weather. It’s a balancing act due to fluctuating demand and revenue patterns. And, it affects a broad range of industry sectors, from retail, hospitality and tourism to agriculture. How these businesses manage their cash flow so they can meet their financial obligations and maintain their day-to-day trading operations at all times of the year is critically important.
Impact on cash flow
During peak seasons, businesses may experience a surge in cash inflow thanks to an increase in sales. This cash injection can positively impact a company’s liquidity and working capital. Of course, this is tempered by off-peak seasons when sales are lower and cash coming into the business is reduced. At these times in particular, it’s important that a careful eye is kept on cash flow. There needs to be sufficient funds to meet running costs and to uphold financial stability. Understanding seasonal patterns and creating a detailed monthly cash flow projection is important.
Here are our top five strategies to effectively manage seasonal cash flow.
1. Forecasting and planning
Start by understanding the dynamics of seasonal trading in your industry sector. Analyse past cash patterns to predict seasonal trends. A business’ cash needs may differ depending on the time of year. Then look at it from different perspectives - from inventory management to staffing levels.
Proactively plan for peak and off-peak seasons and allocate resources – stock, staff and associated services - as needed.
2. Cash flow budgeting
Anticipate your business’ cash needs during the different seasons. A detailed cash flow budget will help you to identify what these costs are and when they will fall due.
3. Stock and inventory management
Efficient inventory management can help prevent you from holding too much stock as well as avoid shortages. The combination will optimise cash flow so you don’t have cash tied up in stock unnecessarily.
Consider running promotions or discounts during off-peak seasons to help clear excess stock, boost cash flow and avoid stock obsolescence.
4. Flexible staffing
Keep a careful eye on staffing levels and consider hiring temporary staff during peak seasons.
Above all, ensure that you have the right staff with the necessary skillsets and training. This will help your day-to-day operations run effectively and efficiently.
5. Work with your suppliers
Negotiate with your suppliers. Where possible, agree extended payment terms to provide your business with a buffer and flexibility during leaner periods.
Leasing and alternative finance can help
Given the importance of effective cash flow management for seasonal businesses, Equipment Leasing can be a valuable financial strategy. Here are some of the key areas where it can make a positive impact.
Purchasing equipment outright usually means a significant upfront investment. Leasing on the other hand allows businesses to acquire necessary equipment without tying up a large amount of capital. This preserves cash and working capital that can be used for day-to-day operations and other essential costs.
Leasing can offer flexible payment structures. This flexibility can allow businesses to align their payment schedules with their revenue cycles.
Access to the latest equipment
Leasing can give businesses access to the latest and most advanced equipment without the long-term commitment and expense of purchasing. This is particularly beneficial for seasonal businesses. They may only require specific equipment during their peak times. And they may prefer to avoid the cost of maintaining or upgrading equipment during their off-season.
Industries and technologies evolve, and equipment can become obsolete relatively quickly. Leasing can enable businesses to upgrade to newer equipment at the end of the lease term. Upgrades may also be made part way through a contract. This ensures businesses always have access to the latest technology without the burden of selling or disposing of outdated equipment.
Maintenance and support included
Many Equipment Leasing agreements include maintenance and support services. This can be especially valuable for seasonal businesses that may not have the resources to manage equipment maintenance and repairs during their off-season.
In conclusion …
Seasonal trading can have a far-reaching impact on a business’ cash flow, which can create both opportunities and challenges. Strategic planning, forecasting and the implementation of flexible operational strategies can make a significant difference. But, alternative finance such as Leasing can also help. It can create financial flexibility, access to the latest technology, and the ability to match expenses with revenue cycles. It can also help avoid large upfront costs so businesses benefit from flexible payment structures. In this way businesses can better manage their cash flow and navigate the challenges of seasonality more effectively.
Would you like to discuss how GRENKE Leasing can help your business stay agile? We’d be delighted to hear from you. You can also learn more about the benefits of Leasing and its positive impact on the UK economy. Read our very own Report – Lease of Life.