According to the article “4 Tips for Managing Cash Flow in a Seasonal Business” by contributor Lisa Stevens on Entrepreneur’s website, many small businesses encounter at least some degree of seasonality; in fact, according to a recent Wells Fargo/Gallup survey, almost half of small businesses report that they have predictable times of the year that are busier or slower than others.

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Furthermore, the survey continued, 41 percent said that these seasonal differences can make it harder to manage cash flow throughout the year. While every type of business will have different ways to overcome these cash flow problems, Stevens says that all business can benefit from having a cash flow forecast. As such, Stevens mentions four things to keep in mind when managing a cash flow forecast:

  • Know your best season. The first step when creating a cash flow forecast is to know your busiest and slowest seasons. Be realistic: Don’t overestimate peak season revenue and slow season expenses. If you’re an established business, take a look at your historical sales and determine the months with the highest and lowest revenues. For startups, you will probably have to rely on competitive research to project your cash flow.
  • List your recurring variable expenses. Fixed expenses, such as rent and utilities, are fairly easy to remember, but don’t forget such variable quarterly, biannual or annual expenses as taxes, insurance premiums and months with extra pay periods, if applicable. Determine what these variable expenses are and plan them out for a more accurate forecast.
  • Consider establishing a business line of credit. Even if you create a very detailed and realistic cash flow forecast, unexpected expenses may crop up during the year, such as when you need to make a large purchase, or your income may not be as high during a season as you anticipated. Such unforeseen costs can be particularly difficult to shoulder during a slow season, but having a business line of credit can help you stay afloat until times get better. With a line of credit, you can access the capital you need, often at a lower rate than with credit cards. Work with your banker to determine if this is a plausible option for you.
  • Keep your forecast updated. Create a rolling 12-month spreadsheet, and be sure to update it at the end of every month. When updating this document, add a new month to the end of the forecast so you can have a more complete picture of your business’ seasonal and overall health. With regular updates, you will be able to anticipate financial shortages or take advantage of periods where you have more cash on hand.

Read the original article here.