Small business guide: How to deal with seasonal cash flow dips

Running a small business is never a smooth ride. Every new season brings fresh challenges. So while most of the country put on their out-of-office and jet off for a few weeks in the sun, many small business owners are facing a few months of reduced cash flow as a result. 

These 8 tips will help you manage day-to-day cash flow during the quiet periods. 

1. Plan, plan, plan 

We can’t say this enough – planning is the key to building a resilient business that will weather seasonal ups and downs.

If you don’t currently have a cash flow plan in place, take advantage of your off-peak season to revise your contingency plan or start planning for Christmas.

2. Improve invoicing

Late invoices are often the reason for uneven cash flow, which can be particularly problematic during quiet periods. While you can’t control when clients pay, you can optimise your own invoicing process to reduce unexpected delays as much as possible. 

• Set – and communicate – clearly defined payment terms
• Invoice promptly 
• For longer contracts, ask for partial or staggered payments 
• Set up a direct debit to make it easy for people to pay you 
• Add late payment fees to your invoices

If you’ve done all of the above and clients are still not paying on time, FlexiPay, our flexible line of credit, can be used as a buffer for those times when business payments don’t align. If cash flow is tight because of a late incoming payment, FlexiPay can help ensure you don’t miss any of your own payments as a result.

3. Negotiate with suppliers

If you know cash flow will be tight, speak to suppliers ahead of time to try to negotiate payment terms. Could they extend payment terms, let you pay monthly, or offer a discount if you buy in bulk?

4. Diversify 

To compensate for a reduction in your usual revenue stream, think outside the box for ways you can diversify to take advantage of a different seasonal market. 

• Move physical business online…
• …And move online businesses offline – e.g. a pop-up event at festivals
• Look into a complementary product – e.g. adding a line of festival clothing or accessories
• Add a seasonal twist to your existing offering – e.g. an ice cream stand out the front of your café   

5. Reach out to your existing customers 

Incentivise existing customers with exclusive discounts, loyalty schemes or member events to encourage them to buy from you at a time when they wouldn’t normally. 

You could also take this time to gather feedback from existing customers about what they like and don’t like, and what they would like to see you do next. This will boost your online reputation, improve your product or service, and it may spark an idea for how you can manage seasonality.

6. Invest in marketing

If summer is traditionally quiet for your industry, it may be a good time to invest in marketing. Online advertising prices are driven by supply and demand, meaning they’re more expensive – and the market is more saturated – during your industry’s peak period.

Get ahead of your competitors and take advantage of cheaper prices by advertising out of season.

7. Take a holiday 

It’s almost impossible for small business owners to take time off. But it’s essential for the resilience of your business. So, if possible, make the most of your quietest periods to take a proper break. 

Think of it as an investment in your business. Switching off gives you a much-needed boost, so you can return refreshed and with clarity about your next steps.   

8. Get finance to help manage cash flow 

From supplier invoices to wages and tax bills, even during quiet times there are still bills to pay. But with less money coming in, maintaining a healthy cash flow is tricky.

Ideally, you would save for these lean periods during the busy times. But the nature of small business ownership means it might not always work out like this. 

If you’ve been unable to save for whatever reason, then FlexiPay could help you spread your costs, bridge cash flow gaps, and give you the certainty of knowing what you need to pay back each month.

To see how FlexiPay could support your cash flow during quiet periods, find out more here.

01/07/25: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.