Seasonal Budgeting For Your Small Business

Seasonal budgeting…just another thing to do. Depending on your business type and industry this could be a crucial step for you. Many small businesses deal with the ups and downs of sales throughout the seasons. This seems especially true in Michigan where we literally have four completely different seasons, weather and temperatures. It really effects how families and consumers spend their time and their money throughout the year. It can even impact whether people leave their homes!

It Isn’t Just Sales – Seasonal Budgeting

In addition to seasonal sales, there are also many types of small businesses that have seasonal expenses. These can be jarring to your cash flow if you are not prepared. Here are a few examples:

• Employee Bonuses
• Business or Workman’s Compensation Insurance Premiums
• Large Inventory Purchases
• Seasonal Marketing Endeavors
• Large Equipment Purchases…Additions or Repairs
• Rental of Extra Equipment or Supplies

Sometimes things are going along just fine and one of these things sneaks up on you. However, did they really sneak up on you? Or were you just unprepared or poorly managing your cash flow? Small business owners wear so many hats. Sitting down at the beginning of the year and making a plan for these seasonal expenses can save you a lot of frustration later on.

“Failure To Plan, Is Planning To Fail”

Making A Plan – Seasonal Budgeting

First things first…sit down and make a list of the seasonal expenses you can reasonably predict. Your Profit & Loss Statements from the last 2 years can help you with this. Some of these expenses are “stationary” – they happen on a certain date or at a certain time. On the other hand, some are not stationary and you can choose when to budget for those expenses. Whenever possible, spread all of your seasonal expenses throughout the year.

There is not a “one size fits all” approach to this. It is very dependent on your business and your sales. More often than not, dividing the total expenses between 12 months is a great start. Instead of $4000 needed for projected bonuses on June 1, save $334/month  and transfer it to a savings account. Do this for the 12 months preceding. I once worked for a small business owner who used to divide large and/or seasonal purchases in to 8 monthly payments. He used 8 instead of 12, because he knew there was going to be down months where he couldn’t swing the savings. He was able to balance out those months by saving a little more in 8 out of the 12 months.

The most important things is acknowledging those seasonal budgeting items and making a plan for them. Just having them down on paper is a great way to avoid them “sneaking” up on you!