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.
