David McDonald
Contact West Carr & Harvey

Managing cashflow cycles

‘Tis the season to be jolly and for some of us, ‘tis also the season to reap the reward of the busiest time of year.

We work with many businesses on managing their cashflow ups and downs, an area that is especially important when a large proportion of your annual income might be earned in a short season.

For this time of year, those in tourism, hospitality and retail will certainly be experiencing this. Farmers and some forms of manufacturers will also experience this, but at different times of the year. Regardless, the same rules apply for best managing your cashflow cycle in response to these peak periods.

If this sounds like you, here are our top tips for dealing with cashflow cycles:

Plan ahead
It’s best to get in early to predict your seasonality so you may project the year ahead for peaks and troughs. By allowing for your business pattern, you can plan your overall yearly income and establish a way to distribute it evenly throughout the year. Essentially, to be able to manage your cashflow and adequately plan ahead you need to understand your cycle. For example, when will the money be coming in, how much will there be, and when will it flow back out again?

Make hay while the sun shines and stash the cash
While you’re experiencing the glory days of your busy period, be sure to set aside some money for future needs. Putting money aside will assist with paying taxes when they are due and building up a cash reserve for the quiet periods will be greatly beneficial.

Look after your credit and consider loans carefully
Credit and loans should all be part of your annual plan to work in with your peak and quiet periods. If you know there will be shortfalls, it would be best to ensure overdrafts or short term finances are in place early on (before you need it). Ideally, long term debts should be structured around when you have cash, so that repayments can be made when your business is flush with finance. Ensuring your clients and customers pay you at appropriate times in the year can be helpful to manage the quiet periods also.

If you’d like some assistance to put together an annual plan to best manage your cashflow cycle, please get in touch with us anytime.