Although you wouldn’t know from the weather, summer is just around the corner. I promise it will be back again this year. This will come as no surprise to the many UK businesses in hospitality, retail and services who are preparing for the summer season. For garden centres, outdoor dining or even wedding-related firms it’s important to make the most of these months.
Estimating customer demand is a core part of the success of these businesses. If you don’t have enough inventory you lose sales. If you have too much and overestimate customer demand you may have to face losses that come with spoilage and discounts.
Inventory management can be challenging but if you get started in time and take a methodical approach you’ll be one step ahead.
Here are some seasonal inventory and cash flow do’s and don’ts to keep in mind.
Don’t stop positive momentum
Consider the following scenario. It’s a record-breaking summer (fingers crossed) and sales for your sunglasses business are through the roof. As a result you find yourself with an unexpected need to reorder additional stock before your regular monthly delivery. What do you do? The knee-jerk reaction may be to wait but bear in mind that if you can access funds and still make a profit, placing an additional order may be the right answer.
Do plan ahead and communicate
Good inventory management saves you money. The main challenges around seasonality require you to understand when peaks may occur and the relative size of those peaks compared to normal demand. This means regular checks using tech and tools to know what your real-time inventory status is whilst also keeping an eye on your outlook. This will allow you to communicate with suppliers, who will appreciate the heads up on filling larger than usual orders.
Don’t say no to taking on debt
There are several options that seasonal businesses can consider to make the most of the ups and downs of the year.
Cash advances can be useful. For many businesses it is a reliable source for seasonal business funding but it’s only a good fit for businesses that make most of their sales using credit cards as the amount of credit you get access to will be based on your cards sales, not your total sales.
Revolving credit facilities are another popular option. They can be arranged with a bank or other financial service provider and gives a business access to the funds when needed. Any incoming cash flow will then be used to pay down the outstanding debt ahead of schedule.
Credit lines can also be set up and ready to go when you need them. Today there are options, including Spotcap’s, that allow businesses flexibility in terms of repayments and don’t require any collateral. Setting up the credit line involves no costs and functions as a free option which comes into play once a ‘drawdown’ is made.
Do be flexible
Let’s face it, the only thing that is certain is uncertainty. A miscalculation in inventory can mean that you have less stock than you thought. Your manufacturer could discontinue your product without warning during high-season. A slow-moving product may end up taking all your storage space.
These scenarios are all very possible but with solutions ready you will be in a better position to manage them if they do.
Originally published May 4 2018 , updated May 21 2018