How to Manage Seasonal Cash Flow for End and Beginning of Year

Managing seasonal cash flow is an ongoing struggle for all businesses. August is viewed as a "ghost month" because people go on vacation and disrupt forecasts for business activity and markets . Other businesses bemoan the doldrums of February when the glitz of the holiday season is long gone and most industries hit a stretch of low activity and use it for projects .

For many retail businesses, the sudden dropoff from the heights of the holiday season to the still waters of January wreaks havoc on cash flow management. This is a dangerous problem, especially if you've ramped up spending to capture the holiday rush. The good news is your business knows that the sudden seasonal shift is approaching.

By taking the time now to plan, you can steady your business and maintain a strong position in your market during the opening months of 2024. Planning includes forecasting future sales volumes, laying out the steps to keep enough cash flow when things slow down , and even calculating your holiday sales season expenses to minimize turbulence.?

Taking some time out of your jam-packed holiday sales schedule is difficult, but it's the first step in creating your comprehensive seasonal cash flow management plan for the end of this year and the beginning of the next.

Know What Seasonal Cash Flow Challenges Your Business Is Facing

Before you can create a plan that proactively minimizes threats to your cash flow or bolsters your on-hand cash, identify where your cash flow may be weak. These considerations will be different at the end of 2023 and the beginning of 2024. For most online retailers, cash flow concerns include:

• Covering high CPC, advertising, and marketing costs—Even if you're certain you'll recoup those costs in holiday sales, spending that cash will at least temporarily lower your reservoirs.
• Hiring additional staff or third-party services—This can also tighten your cash flow either because you're pre-paying for services or because, as your business operation grows, you need more cash to stay protected.
• Keeping up with demand—The holiday season is tricky. If you can't move fast enough to have a ready supply of in-demand products, then your leads will go to your competitors.

Your EOY cash flow concerns are likely focused on being able to make big purchases. Once the calendar flips to 2024, your concerns may shift to:

• Not having the sales volume to cover staffing and overhead
• Having excess inventory from the holidays
• Maintaining marketing campaigns so you can retain all those expensive leads and customers you won during the holiday shopping season

6 Strategies for Managing Seasonal Cash Flow Concerns During the Rest of 2023 and the Beginning of 2024

Proactively protecting your seasonal cash flow makes your business stronger. The more tactics you can adopt, the more resilient your business will become. Consider these six strategies and how they can help your company thrive over the next several months.

1. Boost Your Inventory in Advance

One of the most helpful things is to make a large order ahead of the holiday season—and get a discount from your suppliers if you can. The earlier you talk to them, the more likely they will offer you a discount before their supplies get low. Planning with suppliers is one of the best ways you can time your inventory to be at its peak when the spike in customer demand hits. Further, it will enable you to undercut the competition in price points and selectivity.

You'll also be able to coordinate more strategic marketing campaigns and product promotions, timed for the best effect (and without tipping off the competition). The stronger your relationship with the supplier is now, the more likely they will give you preferred status in the future. A strong relationship pays off if you need to place last-minute orders to replenish stock on your top-performing products.

There's no harm in asking about this beforehand—and the conversation will be smoother if you have a detailed list of the products and quantities you might need. It could even influence their buying habits from manufacturers to set you up for maximum future success. Start the conversation now with the intent to place orders and fill your calendar with estimated delivery dates.

Upfront cash can help you do this, especially if your funding source offers repayment plans based on future sales without substantial interest rates from traditional lending institutions. Signing up early for new funding strategies will help you solidify your goals and make new inventory arrangements before your competition.

2. Analyze Past Data and Sales Projections to Forecast Your Cash Flow

Review your sales forecasts based on data from previous years and current market projections, which will help you establish the amount of funding you can and should secure. If you have funding plans with repayments that correlate to actual sales receipts, this is less of an issue but still an important consideration to keep future cash flow in alignment with future needs.

Analyze your past inventory data as well because this will help you match your funding to predicted inventory needs as tightly as possible. Include the following metrics in your analysis:

• Total sales volume
• Product performance
• Returns types and frequencies
• Restock costs

Doing so could reveal flaws in your inventory management system before it's too late. As you measure your company's previous metrics, note issues in the management platform that could siphon your holiday season earnings into extra, needless manual labor in January. It will also reduce the potential for shipping errors, which would otherwise give your company negative marks in customer service.

3. Use Your Current Momentum to Transition to New Sales and Marketing Strategies

The holiday sales season has one primary objective: generating revenue. Many businesses get a disproportionate amount of their revenue from holiday shoppers, so most of your efforts will undoubtedly focus on hitting those financial goals. But there is a secondary objective that should always be on your team's mind: keeping your holiday visitors as long-term customers.

After all, the costs for acquiring customers go up during the holidays —competition is fiercer, keywords are more expensive, and ad space skyrockets across all mediums. To see a significant profit from these hard-won conversions, it's necessary to sell to them again and again in different contexts. The shoppers who saw your holiday ads will need:

• Regular emails about new products and industry knowledge
• Ongoing promotional offers
• Targeted marketing outreach as the seasons change and your customers' interests change with them

By creating new campaigns and purchasing continual ads, you can extract more value from your customer base. This means carefully investing your marketing dollars in longer term services. Gauge the value of additional holiday campaigns against 2024 campaigns that may offer a higher ROI. Alternatively, if you don't want to cut either cost, find a supplemental source of funding.

4. Identify the Labor and Economic Trends That Impact Cash Flow Around the End of the Year

Addressing shifts in inventory management is only half the battle when preparing for seasonal cash flow needs. Look at your past HR data related to labor and other staffing matters, and start thinking about how much financing is required to efficiently address seasonal labor needs.

• Which months have historically required more labor hours?
• What is the most efficient way to allocate them?

Think back subjectively and consider the impact on your company's morale. If your staff was delighted to get overtime, start encouraging them to look forward to the holiday season. If, on the other hand, there were signs of burnout during particularly hectic years, start taking new resumes and asking your current employees about their travel plans and flexibility now.

Remember that in years when factors might reduce holiday spending, such as high inflation, it can increase the proportion of sales that occur in the months before the holiday rush. A massive seasonal increase in sales still happens, but it's more spread out. Consider how flexible your workforce and inventory funding are, which is exactly how flexible you need your cash flow to be.

Don't spread your preemptive efforts out completely though. Black Friday (November 24th in 2023) and Cyber Monday (November 28th) still dominate the holiday spending season. Small Business Saturday (November 25th) is also gaining popularity as more shoppers look to support independent retailers. Set yourself up to take advantage of all three, especially if you can secure funding for highly involved marketing campaigns.

However, don't overdo it. A survey by Finder discovered that more people would be enticed by end-of-year discounts of 50% rather than 70% or even 90%. As surprising as that is, it's good news for retailers. Discounts of 25% only had a slight boost in interest, so the higher (but not excessively high) the deal you can begin advertising, the more customers you'll likely attract. The best way to keep prices low is to secure new financing for vital business functions without tightening your margins.

As the holidays approach, if you see warning signs that sales projections won't be as clustered around the significant buying periods, don't let it discourage you. Become more proactive and reasoned in your preparations because huge sales are still going to happen— just be prepared earlier to meet your buyers where (and when) they're at.

5. Be Ready for a Pivot or Drop in Consumer Activity After the Holidays

This is less of a strategy and more of an underlying principle to guide all of your decisions. Whether it's your business's first holiday sales season or you have years of data tracking seasonal cash flow, know that purchases grind to a halt after the excitement of the new year passes—and where it doesn't grind to a halt, it slows significantly.?

To prepare for this, make cautious choices, such as:

• Hiring contractors and third-party services instead of full-time employees
• Finding growth capital investors with alternative payment plans instead of loans that require a fixed payment schedule
• Not overcommitting to annual plans or upfront costs
• Anticipating what you can do to minimize the costs of excess inventory

As you continue to make purchases and invest in the last weeks of the holidays, don't let the coming slowdown fall off your radar.

6. Find Additional Funding Sources to Boost Your Q4 and Q1 Cash Flow

The easiest way to ensure you have sufficient seasonal cash flow is to have more cash. Growth capital funds can streamline your business's growth by giving you access to upfront funds without having to wait for organic growth. There are multiple avenues for funding, from platform-specific offers to third-party funding options to business credit cards. Each one offers cash that you can use to generate and fulfill holiday demand and stay active during the beginning stretch of 2024.

The key is finding a financing option with repayment plans that fit the reality of winter slowdowns. Carefully read through the terms of different financing options, and avoid options with fixed monthly bills that can eat into your cash flow. Instead, opt for a partner that aligns repayment with a small portion of your sales volume. This minimizes the risk of repayment outstripping your financial capacity.

Get Your Finances Ready for 2024 With a Robust Cash Flow Plan

Even when you're in the middle of holiday marketing and fulfilling orders, take time for the fundamentals. Without a strong plan to protect and grow your seasonal cash flow, your business may not be able to capitalize on the work you've put into building your customer base.?

At Onramp, we provide flexible growth capital in advance . eCommerce businesses can qualify for funds, use them for the projects and business costs that matter to them, and then repay the funds at a rate of 1% of your sales volume. Get an offer and see how our financing can make managing cash flow an easy business win.

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