March 28 2017
While owning a seasonal business can be rewarding, the inherent ups and downs can also be a challenge. There are ways to help weather the fluctuations if you know what to look for and if you get the help of an accounting professional. Here are our recommendations to manage the accounting of your seasonal business and how your accountant or CPA can help.
Plan, plan, plan
Proper planning is key to any business, but with a seasonal business, it's even more crucial. You'll need to plan for at least six months, but we recommend planning for an entire cycle of your business to get a truer picture of what you'll need to do to make it through a full year. The right planning can help you navigate the slower months while keeping you from feeling a pinch on your budget, making it less likely you'll need to dip into a line of credit.
Earning income for only part of the year, yet having expenses throughout the year can make for tricky cash flow. When money is rolling in, pay debts and hoard extra away to cover lean times. When funds are low, review costs and see where you can cut back. Lean times will make managing your receivables even more important because late payers will put a squeeze on your available cash.
It's also important to know the cycles of your business, something that's easier to do if you've owned it for a few years. If your business is new, you run the risk of misinterpreting your numbers. You'll need to do some homework to figure out what you can expect.
How your accountant can help:
Your accountant will help you plan the entire year for your business. He or she will be able to show you where you'll need to squirrel away some extra cash. To help with cash flow, you can outsource your bookkeeping to your accountant, and they can keep up on your invoicing, so you can focus on growing your sales. If you recently purchased the business, your accountant can help you find industry data so that you can better understand your sales cycles.
Work on your credit
Even with the proper planning, unexpected expenses can (and often will) pop up. Equipment breaks, a big sale falls through, or Mother Nature decides to wreak havoc. For these times, it may be necessary for you to have a line of credit to help cover those bumps.
How your accountant can help:
Your accountant can help you find ways to boost your credit score so you can get better terms. They can also help you navigate the waters of financing and help organize your paperwork, so you'll be able to secure the best financing available.
Use your off-season wisely
While it can be tempting to take a vacation once you've shut the doors for the season, you should put it off while the past season is still fresh in your mind. Review the business and analyze what worked and what didn't. Take inventory and note overages that you avoid next season. Use the downtime to tighten up your systems and work on your business and then take that much-needed vacation.
How your accountant can help: A good accountant is a pro at efficiency. Your accountant can introduce you to apps and processes that will help you run your business like a well-oiled machine, whether it's off-season or peak season. They can also help you evaluate your inventory at the end of the season and guide you on whether or not it makes smart financial sense to sell off the remaining goods to improve your cash flow.
Seasonal business owners can enjoy the best of both worlds -- with proper planning and the right team in your corner. Want more ways to run a successful seasonal business? We'd love to chat.
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