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How To Manage Seasonal Cash Flow

Anything from summer holidays to tax season to just plain terrible weather can have an effect on a business’s cash flow. High seasons bring in more money whereas the low ones, of course, mean income is less.

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Whether it’s fluctuating tourism, or simply your clients’ own budget cycles that affect your business, there can be run-on effects from these peaks and troughs of cash flow.

When income peters out to a lower level, the basic costs that come with running a business do not. Rent for premises is a cost that must be consistently paid each month, as are bills and wages and taxes, so it’s imperative to have the cash at your disposal in order to keep up with payments you need to make.

Don’t let those times of year that are more lucrative lead to a false sense of security – prepare for your low seasons where money doesn’t flow as quickly with some of our tips below.

Top tips for managing cash flow

There are a few easy things you can do to avoid falling into the trap of letting costs dictate how your cash flows through your business.

Identify on and off seasons

Start with properly identifying your peak seasons and those that bring in less income. Once you know the pattern of your income each month you can create a forecast that will help you budget accurately – accuracy is key so be realistic and don’t overestimate for high seasons. With your forecast you can begin to get into a pattern of doing this each month and then compare your actual monthly results with what you have predicted. This process of reviewing month by month will give you a better idea of your business and you’ll be able to better correlate your cash flowing in to your costs going out.

Stick to your budget and don’t be tempted to splurge when you’re having a good month as you may end up needing that money later on down the line.

Anticipate the slow months and fund accordingly

When you’ve successfully figured out which times of year are best for cash flow and which cause you to struggle, you can work out other ways of funding. Many businesses that struggle seasonally, such as restaurants and retailers, take the majority of payments through a card machine – aka a chip and pin machine or PoS terminal. It’s possible to get the cash you’d earn from this type of payment up front on a monthly basis with a merchant cash advance. Some funders on our panel offer an advance on projected revenue and repayments are based on those future sales you’ll make. So if you’re forecasting a quiet period, your repayments will be lower to better align with the performance of your business.

Don’t overestimate stock requirements

It’s always tempting to over prepare for high seasons where your stock or service will be more in demand, but if you grossly over order then you’ll probably be left with surplus at the end of the season. It can be difficult to shift this extra stock and you may even end up making a loss.

Get on top of invoice payments

If you do a lot of business where you invoice for payment, make sure that you don’t let them go unpaid. Set up a streamlined credit collection process so that you don’t miss out on payments that you’re owed. You can even get advances on your invoice payments before they come due at the end of 30 or 60 days with an invoice factoring or discounting facility.

Put money aside in high season

It’s tempting to splurge when your business is doing well, that welcome extra cash burning a hole in your company’s pocket. But if you put an amount aside during this time for a rainy day rather than using it right away, you’ll have a backup plan in the low season for emergencies.

Keep operating costs under control

Consider leasing equipment that you don’t need all year round. Any machinery that stands idle during off seasons isn’t paying for itself during this time and you could free up capital by looking at an asset finance agreement.

Prepare for unexpected expenses

Despite all the best planning, surprises happen and they don’t wait for a convenient time. Whether it’s a higher tax bill than expected or last minute repairs for equipment, the costs can add up and eat into your cash flow.

Think about opening a line of credit such as a business overdraft or credit card to give you peace of mind when those surprises crop up.

Talk to us about your options

Running a seasonal business is definitely tricky, but with the right planning the business can really thrive. Review your cash forecasts as regularly as possible, and thrift and save wherever you can, and you soon will be able to easily predict and manage the cash flowing in and out of your business.

If you’d like to discuss some of the financing options we’ve mentioned above, fill in our form or give us a call and one of our consultants will be happy to have a confidential chat about the needs of your business.

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