Plain definition
Seasonality is a predictable pattern in demand, revenue, cost, or cash that recurs at particular times of the year. It is not merely a month that happened to be weak; the pattern must be tested against the business calendar and prior periods.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A retailer earns 40% of its annual sales in November and December, but it pays suppliers for much of that stock in October. Its October cash forecast therefore falls by before the higher winter receipts arrive. Management arranges inventory funding and sets a lower purchasing limit if early seasonal orders lag.
Annual profit may still be sound, yet the company can miss an October payment if it plans from average monthly sales.
A recurring pattern can change when product mix, customer behaviour, or the timing of holidays changes.
Why it matters
Seasonality matters because the cash commitment often comes before the sales peak. Treating the annual average as the monthly plan can overstock before weak demand or leave the company unable to supply its profitable period.
Practical consequence
Plot monthly sales, gross margin, inventory purchases, collections, and payments for several comparable years. Separate calendar effects from one-off events, then place the resulting purchase and collection dates in a cash forecast. Review early indicators during the season and reduce orders or arrange funding before the cash low point; historical seasonality is a guide, not a guarantee.