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The Importance of Seasonal Cash Flow

by Frank Crandall

I do not have to remind horticultural businesses of the significance of ensuring seasonal cash flow to pay bills throughout the winter months. As we wind down our landscape, the busy season for maintenance, garden center, design, and nursery businesses, it is time to evaluate, assess, and plan for 2013. Top on the list is to analyze the cash flow for the next three to four months.

If you have enjoyed a profitable year and have banked significant funds for the winter months…congratulations! For those companies that are nervous about the slower months: take heart, all is not lost! There are ways to assist you to get through the predictable slower winter season. The off season is also a great time to review your 2012 year of operation, conduct evaluations, refine your business practices, and establish a budget for 2013.

Cash Flow Analysis

Most important for the next few months until spring returns is to make sure you have enough cash flow to carry you through until deposits and payments begin to come in. If you do not have a cash flow chart you need to create one. Take last year’s actual gross sales by month and enter them on a spread sheet. Next make projections for the year 2013. I realize these are “educated guesses,” but by looking at client sales for the last year, projects in the works, and potential jobs you can conservatively estimate each month’s sales. Next, you need to enter the actual expenses (fixed and variable) for each month and anticipate the expenses for 2013. If you notice a cash shortfall during months in the winter, this is the amount of additional funds you will need to meet your financial obligations.

Click here for a cash flow analysis template. Click here for a Cash Flow Projection Template.

Suggestions to Help Cash Flow

There are several ways to meet your cash shortage obligations: use of savings generated from previous year’s profits, credit lines (if your bank still extends those to your business), credit cards (be careful of overextending yourself and paying high interest rates), loans from banks, loans from friends or relatives (be careful; if the loan can not be paid back, you risk damaging relationships!), or exploring winter job opportunities to increase winter customer cash flow. No matter which method you choose, the Cash Flow Chart will help you see, anticipate, and plan for shortages.

There are other techniques to increase cash flow during the winter. Over the years I tried various incentive programs that worked out well in bringing in money when cash was in short supply. One program was a Maintenance Prepayment Program in which the customer paid the average of their April and May maintenance service bill in exchange for a 10% discount on all the maintenance services performed during the upcoming season. The discount was earned with a payment by February 1st. Another way was to offer Landscape Plant Certificates, with a 25% discount on the plants clients want for the spring and that they pay for in full by February 1st. The certificate (it could be for plants, materials, landscape services, or materials) could be redeemed anytime during the upcoming season. Installation, delivery, and additional services would be paid at the time of planting or delivery with no discount.

Be creative! You will find that your dedicated clients want to help you stay in business and improve your winter cash flow…and giving a discount is the way to make it worthwhile for them. Anytime you can offer a win-win program your clients will support it.

Establish a Budget

There were years when I avoided the B word. But, I soon realized that running a large (or small) business without a detailed budget was asking for problems. Creating a budget with comparisons to the previous year and projections for the upcoming season is critical to financial success.

Use your accountant as a resource to help develop a budget and help you to interpret your Profit & Loss Statement so you can use the information to operate your business more profitably and successfully. Reviewing your budget at least monthly during the season will allow you to make adjustments quickly without waiting until the end of the year and finding out disturbing financial news! When compiling your budget, seek input from your key employees, office staff, and bookkeeper to construct a comprehensive budget that your personnel understand and will support. Take into account the pulse of the national and local economy in making your projections for the upcoming year. Remember the accuracy of your projections will have a profound effect on your bottom line – all the more reason to review the budget frequently!

Set Goals for 2013

We are fortunate in the horticultural industry to have the winter months to assess our previous season, evaluate our staff and operations, attend workshops and conferences, reorganize our businesses, and set new goals for the upcoming season. Take advantage of this opportunity to review, refine, and renew your objectives for the next season!

About the Author

Frank Crandall owned and operated Wood River Evergreens, a landscape design, construction, and maintenance firm, for 38 years. In 2010, he established Horticultural Solutions which focuses his experience in the greens industry on helping other firms and clients find solutions to business challenges. Frank may be reached at