Managing a seasonal business is difficult because you must take your off-season months to make sufficient stock to sell when you are busy, yet must wait months to be paid having purchased the product to be manufactured, several months before. This is when businesses can take advantage of factoring accounts receivable to help relieve the serious financial challenges that you will face.
The Difficulties of a Non-Regular Cash Flow
As a manufacturer making goods that are required at a specific time of the year, when you sell those goods, the receiving company will probably ask you for 60 or 90-day terms because they will have to wait to be paid. This means that unless you are managing your factoring accounts receivable efficiently, you could spend several months of the year without any income at all.
A company that only operates during the summer months, because of the poor weather during the winter, may only earn an income during those hot months.
Nevertheless, they face a consistency of regular bills during the colder months. Their head office and equipment must still be financed even if most of the employees are not available during those months. This is another opportunity to increase your cash flow by offloading your factoring accounts receivable so that you can be paid for work completed, as soon as possible.
Cash will not flow into a seasonal business during the slowest months of the year. Any invoices that are outstanding from the previous season can be paid by your factoring company who will then chase the debt. This helps the seasonal business survive during the difficult periods and bring instant cash flow at the beginning of a busy season, before waiting for customers to pay their invoices.
It may be impossible for a seasonal business to manage their finances efficiently without using a factoring company. Relieving the burden of these challenges means that the company can focus on doing business, knowing that their invoices will be paid quickly and competently.