Title: The Effects of Seasonality on Working Capital | Your Business
Headings: The Effects of Seasonality on Working Capital
The Effects of Seasonality on Working Capital
Inventory Costs
Accounts Receivable
Cash Flows
Working Capital Management

Content: Cash Flows
Effective cash management is just as important during a seasonal surge as it is when demand falls. A business can minimize the effect of seasonality with a year-round cash management policy that forecasts annual cash requirements and sets upper and lower limits for the amount of cash the business must keep on hand. If cash on hand exceeds the maximum limit, the business can invest the excess in easily accessible cash equivalent investments. Short-term financing is an option if despite effective forecasting and inventory and accounts receivable controls, minimum cash requirements fall during a dip in demand. Working Capital Management
If a business fails to manage or manages its working capital ineffectively, it may become less profitable and in a worst case scenario may eventually fail. An effective working capital management plan is a combination of inventory, accounts receivable and cash management components that work together to ensure the business can meet its working capital requirements. Accurate inventory forecasting and exploring options such as just-in-time delivery can ensure the business has enough inventories on hand without draining working capital. Accounts receivable controls can encourage customers to fund working capital with timely payments and good cash management policies can reduce the need for short-term working capital financing. References
U.S. Small Business Administration: Working Capital
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