Maintaining and managing healthy cash flow is key for small businesses, particularly if your business is seasonal in nature, like a construction or landscaping business. Remember, work tends to wax and wane with the seasons and you will need to consider the slow times during more prosperous times of year in order to survive. Without adequate cash flow, you won’t be able to pay vendors, payroll, or rent during the off-season.
Create a Statement
The first thing to do is create your cash flow statement to track money coming in and going out of your business. The aim is a positive cash flow year-round, to meet your financial commitments and responsibilities.
Forecast your Cash Flow
Once you have constructed your cash flow statements, you can develop a cash flow forecast for the next year. This will demonstrate the highs and lows of the company due to the season which helps you better predict and prepare. This also identifies if you need to figure out a plan to gain additional capital to supplement the slower seasons in order to survive. If you spot a potential issue, begin to apply for help and financing before it becomes an emergency; a cash flow forecast helps you do this.
Collect What is Due
To increase your cash flow, become more assertive about collecting what is owed to you. Have a payment policy in place that rewards prompt payment for service. Make payment arrangements short-term and aggressively go after outstanding debts. Be persistent with patrons that are slow to pay and request deposits on scheduled projects or products to generate more incoming cash.
Play with Payments
Play around a little bit with creditors in terms of extending payments a bit longer during the slower months. Stretch out payments during the off-season if the creditor is open to this to give you more time to collect from those that owe you, too.
Cut for a Cushion
Cut back and create a cushion for your business. Reduce what is going out and increase what is coming in to prepare for the slower season; it is as simple as that. Come up with creative ways to increase offerings during these times, while cutting down on services, subscriptions, and payments that you are making to help build your nest egg.
Get with a Program
Invest in an accounting software program, like QuickBooks, that is user-friendly and inexpensive. This software will help you create cash flow statements that allow you to monitor and assess your fiscal situation at a glance. This allows you to adjust and identify issues before they become financial crises.
Talk to a Professional Today
Remember that hiring a financial planner and accounting professional is the most prudent and practical way of sustaining and surviving during all seasons. Work now to preserve cash flow and build reserves for later. Don’t wait until times are tough to reach out for help; plan ahead and talk to the industry experts at BMH Accounting today.