How do you manage your working capital if your business is impacted by seasons? If you manage a seasonal business, you would concur that peak seasons can be quite overwhelming due to the sheer amount of work that is required. However, if you are able to plan and anticipate for the peak season, the peak season can be advantageous to your business.
Identify your peak season
During peak season, working capital can fluctuate drastically, depending on how well it has been managed throughout the year.
It is therefore important to first identify your peak seasons by collecting and reviewing sales data from the past one to two years. If your business is relatively new and you do not have enough sales data to make projections, you may consider benchmarking with similar businesses as well as competitors to ensure that you make an accurate forecast of your business’ peak season.
Now that you have identified your peak seasons and off seasons, here are some tips to better manage your working capital.
Manage your inventory
Understanding what you have in your inventory is vital to managing seasonality. Consider investing in inventory control systems, such as cloud-based inventory tools and RFID tracking systems, to help you better assess your current inventory and provide reliable reports for better decision-making. You do not want to find yourself in a situation where you lose a client due to insufficient inventory.
Consider a countercyclical revenue stream
If your business is impacted greatly by seasonality, you may wish to consider another revenue stream, such as a new product or service. The new product and service ideally should not be impacted by seasonality or should at least be complementary to your current revenue stream.
Plan ahead for manpower
Hiring enough manpower is a critical factor to successfully ensure that your business is able to prosper during the peak season. Depending on your industry, it is advisable to start hiring as early as 6 months ahead, but do take note that additional manpower will incur higher labour cost.
Prepare for unexpected seasonal needs
It is vital for businesses to ensure they have working capital for unforeseen circumstances. However, if you manage a seasonal business, this may be more challenging. It may be wise to cultivate a relationship with a funding partner that understands your industry and its seasonal nature.
A financier with experience dealing with similar businesses can help to facilitate what is needed for anticipated expansion, hiring and other capital investments.
Funding Societies provides business financing to SMEs through its digital Peer-to-Peer lending platform and has funded businesses across multiple industries, including retail, wholesale, manufacturing, and logistics.
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