Like many other states of the US, tourism is an important part of Minnesota’s economy. The tourism industry’s demands undergo fluctuations and changes with seasons. Businesses like boutique hotels and adventure tours often see big shifts in demand at different times of the year. Different seasons come with different challenges and require varying strategies.
If you own a business that is impacted by tourism, it is important for you to understand how to handle your finances. Seasonal shifts can impact cash flow, inventory, and staffing, which makes regular accounting more difficult. For example, a hotel may have high bookings in the summer but struggle with cash flow during the winter.
Good accounting strategies can significantly help your business if you are in the tourism industry. An accountant can help with cash flow forecasting and budget management to handle seasonal income fluctuations. Get expert services for accounting Minneapolis and you will notice how your business’ finances take a turn for the better.
Understanding seasonal business in Minnesota tourism
The busiest season for tourism in Minnesota is summer. Visitors enjoy lakes and state parks in warm temperatures and attend festivals like the Minnesota State Fair, which draws millions for its food and entertainment. Activities such as boating, fishing, and hiking also increase, which leads to higher hotel bookings and increased tourist spending.
In winter, Minnesota becomes a destination for skiing, snowmobiling, and ice fishing. There are also events like the Saint Paul Winter Carnival that add to the appeal of winter sports and seasonal festivities.
The off-seasons are typically during the spring and fall. Spring (March-May) and Fall (September-November) attract fewer visitors than summer and winter.
Impact of seasonal cycles on businesses
Visitor numbers in Minnesota vary significantly by season. In 2022, the state welcomed about 77 million visitors, showing strong post-pandemic recovery. However, by the summer of 2024, about half of the businesses reported fewer customers.
Fluctuations in the tourism industry impact the related businesses in different ways. They are as follows:
- Revenue.
The biggest impact of seasonal cycles falls on businesses’ revenue. Summer, naturally, generates the most revenue, and winter provides a stable income. However, the income reduces significantly during the off-season, that is, from March to May and September to November.
- Expenses.
As the number of tourists and income fluctuates throughout the year, so do the expenses for businesses. Businesses may hire extra staff during the busy seasons and lay off some employees when things are slow.
- Inventory needs.
Inventory management is another aspect of seasonal businesses. Winter sports equipment must be prepared well in advance, while summer items like boat rentals need to be ready for peak demand. Managing inventory allows businesses to control costs and make the most out of busy seasons.
Tax considerations for seasonal tourism businesses
If you own a business that experiences fluctuations in income throughout the year, it is important to do your tax planning carefully. Instead of waiting for tax season to come around, make sure you start planning your taxes well in advance. This will reduce stress during tax season and prevent any bad surprises.
Another thing you can do is make quarterly tax payments based on annual income projections. This can be challenging to handle due to unpredictable peak season income. However, you can use income acceleration strategies, like early billing, or hire an accountant to make the work easier and more accurate.
An accountant can also tell you about deductions. Timing your deductions strategically, such as during peak or off-season based on tax rates, can significantly reduce your tax liability.
Don’t get stuck in seasonal challenges!
Owning a business in Minnesota that is affected by seasonal tourism fluctuations is not easy. However, with the right accounting practices and working with the right financial advisor, you can make things easier for yourself. Hire an accountant today!