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

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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