Seasonal businesses — especially those that are based on cash sales — have a unique set of accounting issues.
Do you run a seasonal small business – one where the bulk of your revenue comes in a few months or even weeks? If you do, chances are you are all too aware of the intense nature of the season – a time when you can’t possibly keep up with the workload.One of the first things that slide during a crush of activity for many small seasonal businesses is accounting. Solid cash management practices are often another casualty of the chaos of a seasonal business. Unfortunately, those are two areas where small businesses can’t afford any mistakes.
Here are three accounting and management tips for seasonal business owners that can help keep your seasonable business healthy year round, in spite of the peaks and valleys of income and planning time that come with seasonal small businesses.
Make Your Quiet Periods Productive
One of the great things about running a seasonal business is that there are weeks or months of time after the season when you can regroup, review, and plan ahead to ensure that the next busy season will be profitable. So how can you make your quiet periods extra productive?
Focus on tasks that can same time and money. For example, the “off season” is when you set up the procedures that will make things run smoothly once you’re staffed up with temporary, seasonal employees and handling the fast pace of a seasonal business. It’s also the time when you take care of tasks such as renovation, maintenance, inventory, and financial planning. (More on that below.)
The one thing that your quiet period is not is time off. Even if your business shuts down completely for several months, there are still tasks that have to be done. Sure, you’ll work fewer hours in the “off season”. But shorter work hours and “months of vacation” are not the same thing. Schedule a vacation, but schedule regular work hours during the off season, too. Don’t let procrastination force you into playing catch up as the next season approaches. Here’s a list of some of the critical items that can’t wait until just before your next season starts:
- Updating your website, and literature, and any listings your business has on other websites so people planning for next season will be able to find you.
- Making sure your inventory, premises, and equipment are ready to go.
- Taking care of any required permits, insurance inspections, or other compliance issues.
- Paying your bills – and collecting everything that’s owed to you. (Don’t forget credit card charge-backs, disputed invoices, refunds, discounts, and any escrow accounts or deposits that might be outstanding at the end of the season.)
Budget for Uneven Cash Flow
Even if your seasonal business closes down completely in the off season, your business has year-round expenses, so budgeting for the year ahead is one of the most important tasks for the off season.
Don’t think that your business has 12-month expenses? The IRS and your state comptroller might take a different view. Even seasonal businesses are required to make estimated tax payments to the IRS if they are:
- A freelancer, independent contractor, or self-employed individual who expects to owe $1,000 or more when you file your annual return.
- A corporation that expects to owe $500 or more.
If you don’t put yourself first on the list of people who must be paid, you’re setting yourself up for trouble. So make sure that the first line in your year-round budget is a regular paycheck for you. Instead of living large during the season and relying on stop-gap jobs or life as a starving artist the rest of the year, be sure that you put away some cash during the season to cover the basics the rest of the year.
Pinching pennies isn’t a process that comes naturally to young entrepreneurs who run seasonal businesses. But maintenance, taxes, and equipment financing all need to be based on a 12-month year. So you need to know you’ll have enough money in the bank to cover those expenses during periods when you have little or no cash flow. The only way to do that is to budget for the uneven cash cycles.
Good credit – personally and for the business – is a necessity for a seasonal business. So one of the off-season tasks to take care of is checking credit reports, and doing what’s necessary to improve your score so that you have the credit you may need if a big opportunity comes up.
Develop Alternative Income Streams
If you can develop an alternative income stream that doesn’t require you to get a different job during the off season, you’ll be able to focus on your business year around instead of helping someone else’s business thrive. One source of alternative funds to meet seasonal capital needs is a Small Business Administration (SBA) CapLine Loan, the umbrella program that helps small businesses meet cyclical working-capital needs.
If borrowing isn’t on your radar, or you’re not ready to qualify for an SBA loan, consider services or products that complement your primary seasonal business. For example:
- Landscape services that offer snow cleaning, holiday decorating, or leaf raking services when their primary business isn’t needed.
- Seasonal entertainment companies that offer “behind the scenes” tours as field trips during the school year. Kids are fascinated by the maintenance that goes on at Six Flags Over Texas during the off season, and the park has been offering “behind the scenes” tours profitably for over 40 years. Slappy & Monday, clowns based in Dallas, perform during circus season – and the rest of the year, they offer science-themed school shows that use similar skills (juggling, for example) to illustrate scientific principles, and put on a holiday circus show in a local mall.
- Summer camps in warmer states become team building and church activity centers during the off season. For example, the Green Family Camp in Bruceville, Texas, hosts cultural and religious summer camps for Jewish children during the summer – and becomes a Quaker retreat at Easter and Christmas. Sky Ranch is a horseback & water sports camp for kids during the summer – and a nature & science exploration center for school groups from September through May. The Y.O. Ranch in Kerrville, Texas is a big game hunter’s paradise during hunting season, a summer camp in the summer, and the hope of family outings year round.
So the question is what does the location of your seasonal business offer in terms of off-season income? What skills, or services, can you offer to build a revenue stream during the slack periods? Don’t overlook the cash that can be generated by selling unused equipment scheduled for replacement or upgrading – or even selling the lost-and-found items that no one claimed.
At the end of one season of taking tourists for daily dolphin & whale watching boat tours in Akaroa, New Zealand, one boat owner found himself holding dozens of pairs of designer sunglasses, nearly 50 top of the line cell phones, and hundreds of other items including a diamond bracelet.
So after making an attempt to contact people who might want their property returned, he listed the items on Trade Me, the popular Kiwi online auction site, and wound up earning over $30,000 in unexpected revenue. Now there’s a sign on the boat that says that people have 7 days to contact the owner about lost items, and they’ll be sold after that to keep the ship’s cat in kibble during the off season.
What’s hiding in your “lost and found” box?Photo Credit: This photograph from the 401(k) Photostream was offered on Flickr under a Creative Commons License.