If you own a business in Australia, you will understand the constant ebb and flow of demand from customers. Summer might mean a massive influx of cash, but winter means an empty cash register.
Understanding how to deal with these dips in revenue is essential to the long-term survival of your business. This is a guide to the ways you can smooth out these dips and create a solid financial foundation to keep your business open all year round.
Ways to Manage the Fluctuations in Income
Budgeting and Forecasting
Having a solid forecast will allow you to understand where the dips in income will be before they occur. By looking at your transaction history, you will be able to understand exactly when the dips and highs occur. Once you have this information, you will be able to use the money made during the summer months to pay for the winter months. This will ensure that you do not spend too much during the high season and will keep your bank account flush with cash.
Diversifying Your Income Stream
Having only one source of income means that your business will be jeopardised if this product is not selling. Consider other products and services that you can sell during the times when the primary product is not selling. For example, if you own a surf shop near the beach, you might sell warm clothing during July. If you own a landscaping business, you might clear heavy debris during autumn. Consider a loan from ING and beyond to invest in stock and diversify this year.
Quiet periods are actually very good for business development. This is a good time to upgrade your equipment or improve your marketing plan. You can even run promotions to encourage early-bird bookings for the upcoming peak season. Offering a discount for upfront payments will give you a cash flow injection when you need it most.
Building Business Cash Reserves
Importance of Cash Reserves
A cash reserve is your ultimate shock absorber for your business. Unexpected expenses will always come up, whether it is a broken machine or a sudden increase in supplier prices. With a cash reserve, you can deal with these unexpected events without going into debt or stopping your operations. It is absolute peace of mind for you so you can focus on growing your business instead of just trying to survive.
Setting Reserve Goals
The amount you want to save will depend on your business’s specific needs. Experts say you want to have enough money saved for three to six months of bare essentials. Calculate your bare minimum monthly expenses. This includes rent, utilities, insurance, and salaries. Multiply this number by your desired number of months to determine your ideal reserve goal.
Practical Steps to Accumulate Reserves
Accumulating a cash reserve takes discipline instead of luck or chance. Open a high-yield savings account for your business specifically for your reserves. Set up a transfer so that a percentage of your revenue goes into your reserves account every week or every month. Make sure you make this transfer a non-negotiable expense, just as you have to pay your rent or your electricity bill. Over time, you will have built a significant financial cushion for your business.
Sustaining Business Growth Year-Round
Being able to navigate the highs and lows of the seasons will turn your business from a stressful hustle into a remarkably stable business. By being able to predict your expenses, considering new revenue streams, and saving money during the high months, you will be able to protect your livelihood. Reviewing your past sales today will allow you to understand your business’s unique seasonality. By taking action today, your Australian business will thrive in every season!