Handling high and low periods is vital to managing finances for a seasonal digital commerce business. Getting this strategy right can put you in a great position to maximise peak season when the time comes.
We spoke to Patricia MacCarthy, Senior Financial Planning & Growth Associate at Juni, who shares tips on how finance and other teams across the business can handle seasonality and prepare for Black Friday and beyond.
It’s essential to know the seasonal fluctuations of your products or services when they happen, and what you can predict. This knowledge will feed into your budget and revenue planning so you can adjust it realistically for each month.
Leveraging data within your market to create benchmarks will help inform your planning process. For example, if you know that sales typically decrease during the summer, you can factor that into your revenue model when planning for the year ahead. Instead of setting yourself up to fail with poor planning, you can prepare for having significantly less revenue during low periods without affecting your liquidity. On the other hand, if you know that peak season can bring a significant increase in sales, you can plan with bigger targets and increase investment across the business.
If you’re a new business with no past data to use to create benchmarking, or you want to access market data beyond your own business, you can do your own research or leverage data that’s available for your particular industry. A benchmarking exercise to look into neutral information on typical payment volume over particular seasons for a business of your size can be valuable to help refine your forecasting model and planning.
Once you understand how seasonality affects your product and market, you can understand which elements are in your control and plan accordingly. Some things will always be uncontrollable, like the weather or people taking holidays, which can cause a dip in buying depending on your product. But, there are other elements you can minimise to reduce the negative impact of seasonality. You could ensure a healthy cash flow with a line of credit, look at your product offering and see how you can make it more season agnostic, or offer discounts to encourage purchases.
Cash flow forecasting is a must for handling seasonality and managing financial health. When creating your worst, base and best-case scenarios, you must factor in seasonal shifts. Making a plan for each of these scenarios, informed by changes in buying behaviour, will help you to communicate with other teams to set realistic targets. Check out our article to find out more about how to forecast your cash flow. Given how unpredictable this year’s peak season may be in terms of sales, forecasting becomes even more important to gauge how different scenarios could affect your business.
Juni gives digital commerce businesses the financial tools and intelligence you need to manage and ease cash flow and make smarter decisions – faster. Our clever cash flow analytics feature delivers all the financial insights you need in seconds. Plus, you can access tailored credit offers to ease the pressure as and when you need it.
In low season, focus on trimming down unnecessary expenses to minimise the impact of reduced sales. Low seasons can be less busy, giving you time to dig into your cost base. Look at recurring expenses that may not be necessary, could be switched for something cheaper, or are being underutilised. Find out more about cutting costs in your business in our article.
Low season can also give you time to invest in improvements across the business, especially if you plan ahead to have the cash to do so. Your understanding of seasonality and how your business needs change will influence where you place your priorities. For example, if you know you need more people in the warehouse during peak season, you can focus on hiring or training staff. If you need to implement a new CRM system, now’s the time to make it happen so everything’s sorted before the sales start rolling in.
In the run-up to peak season, businesses start increasing investment in strategic areas. In our Q2 Digital Commerce Spend Report, we saw that companies are already beginning to stockpile inventory ahead of Black Friday and peak season in Q4. But, peak season can also bring a sudden increase in marketing spend as ad campaigns ramp up.
It can be frustrating to pay for ads before they’ve paid off for you, especially when planning for peak season. With Juni, you can get up to 90 days extra to pay for your ad campaigns with Juni Capital for invoices, freeing up your cash flow*. Plus, you can benefit from other features like auto-collecting, paying and reconciling your invoices in a few clicks.
Finance teams should plan for this sort of investment well ahead of time. When doing annual planning, have in-depth discussions with the relevant stakeholders, as this will influence the business plan and budget for the year. The key to getting this right is having the correct information on how different departments plan their spending across the year and how it will fluctuate based on seasonality.
If you’re an ecommerce business with physical stock, understanding seasonal shifts will help you time and plan for inventory. Working with the inventory team can help to guide their decisions so you can reduce costs and hopefully increase revenue.
However, things do change across the year! Forecasting is typically done more often than budget planning, either on a quarterly or monthly basis. When you’re forecasting, check in again with stakeholders to get up-to-date feedback on what’s going on within the business, the current market conditions and if any economic conditions have changed. All these factors need to be reflected in your forecast and planning.
Through thorough planning, forecasting, agile thinking and help from the right tech, finance teams can not only navigate seasonality but use it to their advantage.
* Capital for invoices is available for companies registered in NL, SE, DE, FR, ES, IT and FI, upon eligibility. Fees and terms and conditions apply.
Juni is not a bank – yet. We’re a financial technology company providing e-money services and as such are not part of a deposit guarantee scheme. Learn more about our license and how we keep your business and money safe.
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