How Small Businesses Can Manage Seasonal Inventory and Working Capital
Making sure that you have enough inventory for your business is critical, but managing seasonal inventory needs can be especially stressful for small businesses. You don’t want your customers to have to deal with delays or backorders and you don’t want to pay for additional inventory at the last minute because of a planning mishap. Since inventory is likely one of your largest assets, you will need sufficient cash flow, working capital, and tools to help prevent shortages – OR overflows. We’re sharing some best practices to implement to help your business juggle seasonal inventory and cash flow.
Cash flow is essential to a thriving business and is the lifeblood of your company. It’s crucial for small businesses to manage current cash needs while planning for the future. Monthly predictions won’t provide the insight you need, instead, you should analyze annual forecasts for a more in-depth picture of your cash flow to identify the peak and off-peak seasons. A more in-depth understanding of your company’s cash flow, both incoming and outgoing, will give you a better chance of succeeding – not just today, but for years to come.
Consider On-Demand Storage
Rather than paying for extra warehouse space for an entire year, check into on-demand storage options for any overflow as you need it. This will enable you to save money by limiting space rental to peak seasons only. On-demand warehousing allows you to create a distribution-network strategy that is dynamic. Instead of building a business around the infrastructure you have, on-demand warehousing offers a low-risk way to test new strategies and keep up with rising customer expectations.
Utilize an Inventory Management System
Using an inventory management software program to manage your inventory minimizes human errors and also guarantees that you have the inventory you need when you need it. Inventory systems tell you the number of components you need to create or assemble your final product, as well as how much sellable inventory you have on hand. These systems track online and in-store inventory in one place, so every time a sale is made your inventory is reconciled across all channels. They can also alert you when your inventory of an item is low and prevent you from accidentally sending multiple orders for the same item. If you decide to invest in an inventory management system, there are countless systems available, ranging from simple to comprehensive solutions.
Project Future Sales
Begin by reviewing your prior year’s sales to help forecast future sales. Plan for what you’re likely to sell the most of rather than what you might sell and adjust for weather, special promotions, and out-of-stock items. As you figure out your needs, build your inventory around these calculations, and be sure to have safety stock for an unexpected sales spike or late delivery. Keep your sales plan up to date and make necessary adjustments if you are coming up short or exceeding your goals.
Obtain Working Capital
Once you have a clear picture of the inventory you will need for a year, you should obtain working capital to fund your standard and seasonal business needs. Whether you require funds for everyday expenses such as inventory and payroll, or a larger sum for investments, or large purchases such as capital equipment, you can have immediate access to flexible financing. A working capital line of credit gives you the assurance that you will always have the proper funds.
Determine which cash flow tools will best meet your needs. For shorter-term requirements, a small business line of credit may provide enough cash flow to bridge any gaps. If you’re making a larger purchase of inventory that may take time to sell or need equipment financing, a term loan may be best. Regardless, be sure your future cash flow will be sufficient for making payments on your loans.
It’s important to work with a financial institution that has extensive experience in cash management, such as Allegiance Bank. We provide small businesses with the working capital they need to meet a range of diverse seasonal needs so their business will thrive throughout the year.
Allegiance Bank Can Help You Manage Your Seasonal Cash Flow
Lay aside worries about your slow seasons and keep your cash flowing all year round with Allegiance Bank. Our team can help your business sustain an efficient cash flow along with providing the right resources to finance what your business needs. With a working capital line of credit, your financing can be perfectly tailored to the seasonality of your business while allowing you to borrow only when you need it. We also provide working capital term loans, equipment financing, real-estate loans, and SBA loans. Learn more about Allegiance Bank’s suite of small business loan options, all designed to fit your business goals. Or contact us and one of our banking experts will get in touch with you when it is convenient.