It’s Small Business Week—the beginning of May—and you know what that means: summer is around the corner.

For many businesses, especially women-owned businesses, summer is either their busiest or slowest season. Businesses located in tourist locations, in hospitality industries, or in the wedding business, may see the bulk of their income in the next few months. But many service businesses may experience the doldrums as their clients are off away or saving money for family vacations.

That means your income—and cash flow—is going to fluctuate wildly this time of year. What can you do to even out the seasonal cash flow roller coaster?

First: get money coming in sooner.

** Encourage pre-sales. Wouldn’t you like to have your hotel or salon fully booked and paid for well in advance? There’s a reason hotels offer a discount for pre-payment on reservations: it gets money in their bank accounts sooner. You can do the same. Offer discounts for pre-paid purchases early in the season—such as $100 worth of goods or services (nonrefundable) for $80 when paid before June 15. You may have lower profit margins, but you’ll have cash sooner.

** Hold early season sales events. Sponsor in-store events before the height of the seasonal rush. If customers buy from you early, you’ll turn over merchandise quickly, ease your busiest periods, and improve cash flow.

** Offer gift cards. Gift cards are, in essence, pre-sales. By selling a gift card (or certificate) you get the money in your bank account long before a customer actually purchases the product or service.

Second: get paid faster.

** Reduce billing. If you bill your clients for goods or services, you typically don’t receive payment for 30-90 days. Instead, request pre-payment or require payment on delivery. You’ll have less paperwork during this busy season, too.

** Accept credit cards. By accepting credit cards, you enable more customers to pay you immediately. You get the money in your bank fast—often within 48 hours. Yes, you pay a small transaction fee, but you don’t have to worry about unpaid invoices or checks bouncing.

** Take mobile payments. Mobile credit card readers from Square, Intuit, PayPal and others enable you to accept credit cards even if you’ve never accepted them before. They’re also great if you’re on the go: selling at craft or street fairs, or running a food truck.

Next: pay later, without getting in trouble.

** Negotiate payment terms. Ask vendors to extend the amount of time to pay your bills, to at least to 60 or 90 days instead of the typical 30 days, ideally without incurring additional interest charges. No, it’s not standard practice, but they might be willing to work with you. It doesn’t hurt to ask.

** Request installment payments. For large invoices, ask vendors if you can pay in installments over three to six months instead of one lump sum. Once again, this isn’t necessarily standard practice, but a vendor might be open to installment payments rather than longer payment terms.

** Pay by credit card. This immediately provides you with longer payment terms, keeping more money in your bank account. If you take more than 30 days to pay, you’ll pay some interest, but this gives you more flexibility during a critical period. Just be careful and monitor your credit cards carefully. Ask vendors to accept credit card payments and seek out vendors who do.

** Arrange for vendors to fulfill your customer orders. This is a great business model, especially if you run an e-commerce retail site. You do the marketing and customer service, but the manufacturer or vendor fulfills the order once placed. This way, you buy and hold little or no inventory. Yes, you’re likely to have a smaller profit margin on each sale —vendors may charge more for the product on top of the fulfillment service—but you tie up far less money and reduce risk.

Managing cash flow is always critical to small business success, but it’s especially important when you’re facing a seasonal cash flow crunch.


Copyright Rhonda Abrams, 2019

This article originally ran in Her Money on May 9, 2019