Cash Flow Consistency

Does your business revenue have peaks and troughs? Are you familiar with the self-employed dilemma of feast or famine? Is the demand you experience seasonal? If so, one of your problems may be a lack of consistency in your cash flow.

Don’t Leave it till the Last Minute

To deal with it you need to be spot on with your forecasting. Unless you know what is likely to happen, you cannot make plans to get around it. One of the most common revenue patterns shows highs in November and December, with lows in January and February. This is, of course, because of all the frantic preparations for Christmas and the other holidays at the time. The run up to the holidays can also be very expensive for businesses that traditionally want to show their appreciation of staff and customers at this time.

That is why, for many years, we’ve had the January sales in the UK, as retailers try to boost sales at an expected slow time. It could also be a time for you to offer extra incentives to customers to continue to do business with you when they would rather not be spending. Anything can be better than nothing, so rather than have a dearth of income, could you reduce your margins or find a way to give more added value for a limited period. Depending on your cash flow, generating income may be more important at such a time than achieving high profit margins.

Plan Ahead

If you get in the habit of forecasting your cash flow over coming months, you could choose to spend more in advance of your needs, or set aside and ring-fence cash amounts for specific purposes. Now is the time to be thinking about what you will be needing in six months’ time. Book that office party for December in August and pay a hefty deposit up front, so that you won’t have to find as much money when you are feeling the pinch.

Deal with the debtors

Your bookkeepers will never cease to tell you how important it is to collect your dues from debtors. Not having a good credit control system can wreak havoc with your cash flow at the best of times. When you are coping with a seasonal drop in revenue, it becomes even more crucial. You must try everything you can to get your clients and customers to pay up. When they are clearly in financial difficulties, sometimes suggesting staged payments can help.

Regular discussions with your outsourced bookkeepers will yield other possibilities for dealing with debtors and help you keep on top of the problem. They can also help you with budgeting and forecasting, so you don’t have to do it all yourself.

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