The Five Keys to Stress-Free Cashflow

Business owners often find themselves in a cash pinch near the end of a glamping season, and we want to change your “End of Season Panic” into a “Successful Season Celebration” with some strategies to proactively manage your cash.

With any business, it comes down to that old adage, “cash is king”. Cash allows you to seize opportunities, like taking advantage of bulk order discounts. Cash helps you maintain healthy relationships with your vendors by paying them on time. Cash can save you money by avoiding penalties and interest. Perhaps most importantly, cash lets you, the business owner, sleep at night. The number one killer of small businesses we see is when a company runs into a cash pinch, where several unexpected (or worse.... expected) bills all pile up at once. This begins a downward spiral of late fees and interest that make it harder and harder for a business to dig itself out of that hole.

But it doesn’t have to be that way! By implementing an effective cash management strategy, any business can set itself up to have funds on hand for whatever is thrown its way, without the need for a complicated budget.

Here are our five tips to ensure your upcoming season is stress-free.

1. Collect an Advanced Deposit

Advanced deposits are easy wins in the cashflow game. They ensure you have the funds needed to cover the expenses of that guest’s stay. Collecting even a small deposit, like one night’s stay, gets them invested in staying at your property. A deposit creates an emotional and psychological commitment that guests are unlikely to revert on. By creating this commitment, you are rewarded with a loan from the customer ahead of their stay to cover their expenses.

Our recommendations for advanced deposits:

• Make deposits refundable up to a certain point. People often want time to mull over their travel options. If the deposit is non-refundable at the time of booking, they may hesitate to immediately commit or decide against completing their reservation.

• Make deposits non-refundable up to a reasonable amount of time before their reservation. Know your ideal booking window, such as 14 to 30 days prior to their arrival date, and don’t grant refunds after that window ends.

2. Segregate Funds for Taxes

Business owners get in trouble when they look at their operating account and see a big, exciting number, forgetting that they’ve yet to pay off the credit card, issue payroll, or pay the final installment on those beds that were just delivered. And just when they’ve paid the bills and think everything left is profit, they realize they must pay last month’s sales tax and the upcoming property tax, plus save money for income tax due at the end of the year. Tax time is one of the most stressful (yet predictable) cash crunches that business owners face.

By segregating the funds for sales tax, occupancy tax, and income tax right when it comes into your bank account, you keep yourself honest by not spending money that isn’t yours and will need to be remitted in the next 30, 90, or 365 days. Keeping that money set aside puts you in a scarcity mindset and doesn’t let you overspend funds that aren’t actual profit. If you think it’s expensive getting a loan to cover debt, just wait until you get a sales tax audit. The state charges a much higher “interest rate” than you would have been paying on a line of credit. Speaking of lines of credit…

3. Secure a Line of Credit Before You Ever Need It

A line of credit gives a business owner flexibility to cover a very short cash pinch. Maybe you need to cover payroll and you have a large group coming in the following week, or you need to pay for an order of food for a big event that will settle the bill next weekend. A line of credit is perfect for weathering those small gaps. But [spoiler alert!], banks don’t grant lines of credit to businesses that have cash problems. They want to lend to businesses that are successfully producing cash hand-over-fist. So, when your business is doing well, you have a healthy bank balance, and you have great financials to show your lender, that is the time to get the line of credit.

It’s much like the Tickle Me Elmo supply crisis of 1996: you needed to purchase him well in advance to avoid tears on Christmas morning. Likewise, if you wait until you need a line of credit, you will not be able to secure it.

Our recommendation on a line of credit:

• Once you have your line of credit and decide to use it, know when you’re going to pay it back! It costs money to use other people’s money, and too often business owners think a line of credit is the solution to their problems, when they’re just racking up more debt. Have a plan for how you’re going to pay it back within the next month or, worst case, two months. If you carry it for any longer than that, you’d better have a solid reason why that cash is going to produce more income in the immediate future. If you need a line of credit to cover normal operating costs, it’s time to ruthlessly prioritize your expenses.

4. Know Your Metrics

Hotels and glamping operations are often difficult to budget for because a traditional budget is ineffective to manage your business. Your budget could have the same expenses for room supplies as the prior year, but if room sales have increased 100% this year, thus doubling occupancy, understandably your guest supplies should double as well. Metrics can give you key indicators of how your business is running which will enable you to more effectively plan and manage your cash.

• We highly recommend that every glamping owner know their key metrics like Cost per Occupied Room, Average Daily Rate, Working Capital, Labor Margin, Discount Margin, and Occupancy.

• You don’t need to stop there! You should identify those key metrics that will help you plan for the future, such as the average lifespan of each bed or the average number of days in advance a guest books a reservation.

• And lastly, don’t be afraid to track metrics that may be unique or important to you: average complimentary food and beverage per guest, average days off per owner, or average value of property damage per child on site (if you’ve had destructive kids on site, you know what I’m talking about). You get to choose what is important to you.

5. Don't Be Afraid to Use Multiple Bank Accounts

We business owners are scrappy, but we tend to use all the resources available to us. If you tell us we have $80,000 to do the job, we’ll utilize that full amount. If you tell us we have $20,000, we’ll figure it out with only $20,000. That’s why we should be setting up separate bank accounts to hold the funds designated for future remodels, taxes, projects, and even bonuses. We need to get those dollars out of sight and therefore out of mind.

By keeping the amount in your normal operating fund lower, you’ll trick yourself into a scarcity mindset. You’ll still find a way to get the job done while saving for those other items that are really going to move your business forward.

While we know you didn’t start a glamping business because you love accounting, following these suggestions will help reduce your cashflow stress. Together with keeping clean financials, these steps will empower you to focus on sustainable and profitable growth.

Now that you’ve mastered cash flow, you can pop that champagne and look forward to your successful season celebration!

About Tyler Otto

Tyler is the President and Owner of Glamping Bookkeepers, a remote accounting and tax firm dedicated to helping glamping operations drive profit and build wealth. Tyler has served as a Finance Director in the hospitality industry for everything from 2-star to 5-star accommodations and loves helping business owners perfect their financial performance.

Get in touch at www.glampingbookkeepers.com or contact Tyler@GlampBK.com.

Tyler Otto