Managing Cash Flow for a Seasonal Business

cash flow for a seasonal business ice cream truck

Cash flow is difficult enough to master on its own, but your business is different than the usual — it’s a seasonal operation. This makes cash flow all the more vital to the livelihood of your company since money’s only coming in during certain times of the year.

Of course, yours isn’t the first business to operate on a sporadic or seasonal basis. Because others have gone before you, plenty of tips are out there so you can be sure you’re really harnessing the power of your cash flow. Plus, you have the power of PayPie on your side — we know how to help you manage your cash flow for a seasonal business.

Here are seven tips for managing cash flow for a seasonal business:

1. Set up a line of credit

Regardless of your cash flow, you never know when your operations will require even more money than expected. That’s why you should always apply before you need it — you won’t want to scramble when you realize you’re in a pinch. Especially because banks won’t be thrilled to lend to a company that doesn’t have cash coming in at its current juncture. Apply now to prepare for whatever may happen.

Once you’ve taken all the steps to set up your line of credit, you’ll be much more adept at handling emergency situations, should they arise. Many companies will take out loans at this point to cover their bases, but beware — the interest rates on these sums might be high. With a line of credit established long before a do-or-die moment, you’ll probably have much more reasonable repayment fees. It’s simply a smart tool to have at your disposal.

2. Put invoice factoring on your radar

Sometimes, even with the best planning, a cash flow crisis can happen. You made a huge sale in the busy season and dipped into your resources to do so. Now that things are slowing down, the payment still hasn’t come in. If you need a solution that’s faster than applying for traditional loan or line of credit, consider invoice factoring to help manage cash flow for a seasonal business.

Invoice factoring helps you turn unpaid invoices into funds by letting you sell your invoice to a factor (lender), who, in turn, pays you a set percentage of the invoice. You receive the balance, minus fees and interest, once the customer pays the invoice.

More Tips: 7 Ways to Boost Cash Flow 

3. Audit your expenses

To make the most of your cash flow for a seasonal business, you should scrutinize any and every expense required to sustain your operations. Even though much of your money will, indeed, be necessary to spend, you might find little places where you can trim the fat. Something as simple as an online subscription service for $15 a month that’s left to renew during the off-season automatically can add up to a sizeable — and worthless — expense.

You might have to reconsider the size of your staff and their location, too. Renting a space for an entire year that you don’t need or keeping employees on the payroll even when the season’s over will add up. At a certain point, you can’t justify it — even if your business is staying afloat.

4. Diversify your offerings

Your seasonal business is fruitful, but the off-season is tough. Perhaps there’s an answer to your problem in the form of a complementary product or service that will appeal to your customers when you usually are unable to work.

Think about it — cruise ships sail south for summery escapes to the Caribbean, but they also voyage north so passengers can see New England’s changing leaves or icy Alaskan landscapes. Bustling resorts become locations for company-wide retreats, attracting business year-round with discounted rates to host conferences in the off-season.

Of course, not every operation will have a clear seasonal opposite that will also bring in money. In that case, brainstorm to see if you can come up with something unrelated, but economically viable. However, it’s best if you can use your pre-existing resources and team, so try not to veer too far from your initial business plan.

cash flow for a seasonal business life preserver

5. Build an emergency fund

We’ve already discussed why you should open your line of credit ASAP. At the same time, start building your emergency fund now, so you have cash available in tight spots. Industry experts tend to suggest an emergency fund with at least one month’s worth of operating costs. Don’t be too optimistic about the amount of cash you’d need in such a situation, either — it’s better to be overly prepared than ill-equipped for a drought.

There are plenty of tips for entrepreneurs building an emergency fund — something as simple as gathering coins in a jar can add to your cash flow for a seasonal business. Of course, more substantial efforts like working with a financial advisor or using online tools to tally up your stockpile will make more of a difference. No matter how you do it, setting this money aside and considering it untouchable in your mind is the key to having funds when you need them.

Read More: 10 Best Businesses for Cash Flow 

6. Use downtime to your advantage

Another way to maximize cash flow for a seasonal business is to look at your downtime in a completely different way. Rather than putting your feet up and coasting until the high season resumes, improve your skills and business acumen.

For many entrepreneurs, this means taking classes and enhancing knowledge, so it’s no longer necessary to outsource those tasks that keep your business running. For example, you could sign up for a video editing course and start making your own online marketing clips, rather than hiring a team to film and create content for you. Training your employees to do more can improve turnover rates and boost their sense of accomplishment, among other benefits.

Another way to slash costs in the interim is to do your research. Reach out to different suppliers to see if you can find someone who will give you what you need for less than what you’re paying now. Then, you can even try renegotiating existing contracts with this knowledge. You have nothing but time during the off-season — use it to your advantage.

7. Know your cash flow

No one is more familiar with the inner workings of your business than you. Implement the any of the tips above to your best judgment or come up with other ways to save cash in your off-season.

Whether your managing cash flow for a seasonal business or any business, cash flow forecasting is an invaluable tool. It gives you insights into exactly how and when money is coming into your business or flowing out to cover expenses. It will also help you more accurately identify the timing of your peak income periods.

The more you know about your cash flow, the better you’ll be able to manage it. This is the main reason we created our free cash flow forecasting tool. You work hard and we work hard to give you the tools you need to keep your business healthy.

Discover our cash flow forecasting and other cash flow management tools today.

PayPie currently integrates with QuickBooks Online. Additional integrations are coming soon.

This article is informational only. It does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

Images via Pexels

Accounts Receivable Turnover: Why It Matters

Accounts Receivable Turnover Paid Invoices

As a business owner, you probably have numbers running through your head all the time as it is. But, it’s important to add another calculation to your list — accounts receivable turnover — to help complete your cash flow picture.

At PayPie, we know how difficult it can be to stay on top of every sum, ratio and forecast of your accounts, no matter how diligent of a business owner you are. That’s why we try and make it simpler with insightful tools that delve deeper into your finances, rather than showing you your account balance and nothing else.

Together, we can add this calculation to the list.

What’s accounts receivable turnover?

When you invoice a customer and set the terms of payment, you’re essentially creating a form of credit.

Customer credit is a vital payment method for any business — it lets your customers buy goods or services from you now and fully pay for them later. Therefore, it can drive sales, but it can also be a detriment to your cash flow if some of your customers fail to pay in full, even with time to do so.

Accounts receivable turnover analyzes just how well you’re dealing with outstanding customer credit. The simple ratio, also known as the accounts receivable turnover ratio or debtor’s turnover ratio, gives you an insight into how customer credit affects your business.

Mainly, it points out how well you’re managing your customer credit relationships and collecting the proper payments on any outstanding debts your customers are carrying.

Read More: 7 Ways to Boost Cash Flow

How accounts receivable turnover is calculated

Jot down this ratio — or bookmark this page — so you remember it from now on:

Accounts receivable turnover = net credit sales ÷ average accounts receivable during the tracking period

Be sure you’re only incorporating your credit sales since cash payments have nothing to do with the effectiveness of your crediting scheme.

This ratio is often calculated on an annual basis. However, it can also be measured on a quarterly or monthly basis.

accounts receivable turnover ratio calculation

An example of how to calculate accounts receivable turnover

The following is an example of how to calculate accounts receivable turnover on an annual basis.

Let’s say Widgets Incorporated had $1,000,000 in accounts receivables as of January 1, the start of their fiscal year. On December 31, at the end of the year, they had $2,000,000 in accounts receivables.

Throughout the year, they had a total of $5,000,000 in net credit sales.

Step 1: To get the average accounts receivable, you follow the same formula that you would for any average. You add both numbers together and divide by two.

Average accounts receivable = ($1,000,000 + $2,000,000) ÷ 2 = $1,500,000

Step 2: Take the net credit sales and divide it by the average accounts receivable.

$5,000,000 ÷ $1,500,000 = 3.33

Step 3: Divide 365 (number of days in a year) by the accounts receivable turnover to see how long it takes an average customer to pay their bill.

365 ÷ 3.33 = 109.6

This means that the average Widgets Incorporated customer takes nearly 110 days to pay their bill. Clearly, this needs to be fixed. The company makes great widgets, but they’re a bit too generous with their payment periods and need to ramp up on collections.

Accounts Receivable Turnover Ratio

How accounts receivable turnover is used

You can’t predict future sales or cash flow with 100% accuracy, but the accounts receivable turnover ratio gives you deeper insight into your business prospects. The ratio shows you how long it takes customers to pay their debts, which can help you plan your future expenses.

By pinpointing any collections problems your company faces, you can boost cash flow back into the business. This will help you foster future growth for your company and focus your efforts to cultivate a client base that’s financially robust and responsible.

Read More: Cash Flow Basics — Key Concepts and Terms 

Why accounts receivable turnover matters

Your ratio can reveal whether or not your company has a good credit policy. It also shows how well you’re managing any outstanding debts. A low accounts receivable turnover ratio might deter lenders from working with you. Without available cash flow at the right points in time, how will you repay your debts?

If you’re unhappy with the ratio you find, you can implement new policies to boost your figures. For example, a low ratio might require you to impart more stringent penalties on late payments. Or, you could come up with a rewards program for those clients who always — or begin to — pay on time.

Read More: Cash Flow Problems: 6 Top Causes

Evaluating your accounts receivable turnover

What’s a good turnover ratio and what represents opportunities for improvement? When it comes to the account receivable turnover ratio, the higher the number, the better. A sizeable figure can highlight plenty of good qualities about your business, including:

  • You’re regularly receiving debt payments, thus boosting cash flow.
  • Customers pay you back fast, which means they don’t have an outstanding line of credit and can buy more from you.
  • You have a good customer base that adheres to invoice due dates rather than taking on debts
  • Your collection system works well.

On the other hand, you might calculate your account receivable turnover to find a very small number after the equal sign. If so, your low ratio could indicate that:

  • Your cash flow is low since your customers have lingering debts.
  • Customers can’t make payments, which means they likely won’t buy again in the future.
  • You have an overly lenient credit scheme.
  • Your collection system is ineffective.

Fortunately, once you see where you fall on this spectrum, you can start making some of the improvements mentioned above to your crediting scheme. Or, you can keep moving forward if you’ve already got a system that’s proven to work.

If you experience a cash flow shortage while you’re working on improving your accounts receivables processes, invoice factoring is one way to turn an unpaid invoice into cash. Basically, it lets you sell the invoice to a buyer/lender so that you can get a set percentage cash out of the invoice as quickly as possible. (Learn more about invoice factoring here.) 

How accounts receivable turnover affects cash flow

It’s clear how a positive accounts receivable turnover would boost cash flow. If customers are diligent about repaying their debts — and if you incentivize their behavior or penalize lateness — you’ll have more cash pumping into your company.

On top of that, your regular customers will keep coming back, since they’re regularly repaying and re-opening their lines of credit. The more good payments you’re receiving, the better your cash flow will be.

Cash flow is vital to your business— when money comes in on a reliable and regular basis, you can expand your reach and seize opportunities in countless ways. And, while the accounts receivable turnover ratio is one way to figure out how you can boost the amount of cash on hand, you will also benefit from a cash flow forecast from PayPie.

This report takes a deep dive into your accounts receivables to show you just how healthy your business is right now and how much it’s set to grow in the future. It helps you visualize your strongest suits, as well as the areas in which you can improve.

If you’re a business owner, then there’s no better time than now to start forecasting and planning for the future.

Log in — and crunch some numbers of your own — to get on the right track.

PayPie currently integrates with QuickBooks Online. Additional integrations are coming soon.

This article is informational only and does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional. 

Images via Shutterstock and Pexels.

Choosing a Business Banking Account

Choosing a business banking account

It’s already hard enough to open your bank account, scroll through your expenditures and remember exactly when and where you made each purchase. That task would become exponentially more difficult if you added your business expenses into the mix — you’d have to mark each payment as professional or personal, then figure out the rest.

That’s why it’s so important to open separate bank accounts for both areas of your life. Some business owners go so far as to choose two different banks — one for their professional dealings, and one for their personal expenses. The clear separation makes it simpler to stay on top of all your financial standings. Separate accounts also lead to more straightforward tax filings and improve your company’s transparency.

Of course, you can’t do it without choosing a business banking account to start. At PayPie, we know how difficult this task can be without a little guidance. As we’re also all about guiding small and medium-sized businesses, like yours, on how to improve cash flow, here are our best tips for selecting the right place to keep your money:

1. Consider the services you’ll need

It’s simple to shop for a bank that meets your personal financial needs. You know how much money you have, the type of interest rate you want and the ease with which you can find ATMs around town. But choosing a business banking account means having to tick more boxes. It’s up to you to discern which services are vital to you and your company before choosing a bank.

Every business owner’s banking needs will be different, of course, but required features tend to include:

  • Checking and business savings accounts
  • Online banking access
  • Credit cards and deposit-only cards
  • Access to discounted accounts for employees
  • Wire transfers
  • Payroll features
  • Retirement accounts and insurance
  • Discounts on other services, such as shipping and office supplies

You might want a bank that offers lending or other financial services. Some banks will provide further benefits, too, such as checking incentives, overdraft protection and discounted fees for inter-bank transfers. Depending on the ways you’ll use your bank, you can compare each company’s features before settling on the right bank for you.

Learn more about separating business and personal finances. 

2. Compare large and small banks

Well-known names in banking have reached their height for good reason. They’re convenient — if you travel from city to city, you can probably find a branch of a national bank wherever you go. They may also have better interest rates and might be able to provide a longer list of services.

But a smaller bank has a hand in the local market, which means they’ll be more interested in the success of your business. They might be more inclined to give you a loan because they know it will help the economy to bring another company into the mix. They can offer tiered interest rates to compete with bigger banks, along with other incentives. The personal touch will sometimes extend to tougher times, too. If you’re late on repayment or if you overdraft your account, for example, a local bank might not hit you with as many fees as a bigger branch would.

Contrast the merits of local banks with better-known brands when choosing a business banking account. Again, it’ll be important to know what you need before embarking on your search, so you can choose the bank that’s best for you.

3. Ask other business owners

As a small business owner, you already know the importance of networking with other business owners. You can connect in person, online or even at networking events. Regardless of how you do it, though, you’ll find fellow entrepreneurs vital in your search for the perfect business banking account.

That’s because established business owners have already charted the course you’re on right now. They’ve been through the process of choosing a business banking account based on the criteria you have in mind. They also have experience with the places you’re considering. So, reach out to your contacts and ask whom they use. They might have incentives to help you — some banks give clients referral bonuses so the conversation will be mutually beneficial.

Of course, you might find the results of these conversations inconclusive, or you might not know any business owners whose banking needs compare to your own. In that case, you have the internet at your fingertips. Do some online searches to find customer reviews of the brands you’re considering. You should always take extremely positive or negative reviews with a grain of salt. More moderate accounts of what’s good and what’s bad will be more helpful to you in your search.

4. Bond with your banker

Once you’ve landed on the right bank for you, don’t stop there. Instead, try your best to work with the same banker every time you reach out to your branch for help.

For one thing, you’ll be happy to have a familiar, trusted face guide you through something as stressful as your financial dealings. But a trusted banker will also know what types of services might suit your needs, even if you didn’t initially ask for them. They’ll find discounts or improved rates, all of which will enhance your company’s standing without much effort on your part.

Discover 7 ways to boost cash flow. 

5. Bank with confidence

Perhaps the most important tip of all when choosing a business banking account is to go with your gut. Which financial institution makes you feel the most secure? You’ll have an easier time deciding if you’ve done the research to point out the type of services you need, uncovering the banking options you have and asking for others’ opinions.

At PayPie, we’re all about making your financial needs simpler to fulfill — and banking is just one of our areas of expertise. Explore our website and see all the ways we can make your business’ finances stress-free with the click of a button.

Having a business bank account that meets your needs is just one component of managing your cash flow. At PayPie, we’re all about giving you the tools you need to manage your cash flow — starting with cash flow forecasting and risk scoring based on the business data in your accounting software.

QuickBooks Online users can get started today. (Other platforms are coming soon.)

This article is informational only and does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

Image via Pexels.

7 Ways to Boost Cash Flow

boost business cash flow hero image

A successful business is all about the bottom line — are you profitable or are you losing money?

For many businesses, this can be tough at the start. Imagine starting a business, for example. Leasing a space, filling it with furniture, buying equipment and hiring staff all costs a lot of money. And cash doesn’t always come in the second you open the doors.

It’s a frustrating reality when you know you’re on the way to bringing in revenue down the line but you have to sustain your business until that happens. In fact, even established businesses can have cash flow issues.

There’s an answer to your problem — boosting cash flow

Having more cash on hand by using targeted strategies to boost cash flow helps keep a company afloat until it starts turning over more significant profits and paying for itself.

To increase cash flow, you have to find the right balance between spending, cost-cutting and other factors that contribute to the bottom line. PayPie understands that can be difficult to do without a little help or the right tools.

Seven proven methods to boost cash flow

These tactics have successfully helped others bring in cash in the past and can help secure your business’s future.

1. Know your options

Some ways to boost cash flow are intuitive, or they’re otherwise easy to discern on your own. If you’re a newbie, though, you might be better off with a helping hand as you endeavor to increase the liquid assets you have on hand. You can rely on a short-term lender or use software to highlight the areas in which you can cut spending.

For example, you might be able to take advantage of invoice factoring. This short-term lending option will have a factor pay you a percentage of an invoice. Then, they make it their mission to gather any outstanding payments. They keep a percentage, then give the remainder to you. Their initial payment provides you with the cash you need as does their follow-up on the initial invoice.

A cash flow forecasting tool helps you see the patterns in how the money is flowing in and out of your business. It highlights the areas that are draining your business’s cash flow and pinpoints where the cash is coming in — telling you where you can focus your efforts to increase your bottom line even more.

Learn More: How to Read a Cash Flow Statement.

2. Sell unused equipment and inventory

The trick to understanding how to boost cash flow is to be extremely critical with every aspect of your business. For starters, take a look at your inventory. Anything you have left over that won’t be used in the next year should be sold as soon as possible — that is, unless you won’t incur any costs from keeping it that long.

Equipment should also be scrutinized. Outdated machinery or technology you no longer use can bring in a good chunk of change. Plus, getting rid of something that’s taking up space can free up square footage for a more updated piece of machinery. This can serve to boost your business’s productivity. Selling the old model can also bring in the cash you need to buy a newer version.

3. Take bigger deposits

Chances are good your company already requires a deposit for custom orders, large orders or with new customers. Without that guarantee, the client could back out, leaving you with highly customized items or a surplus of products that you’ll have a hard time selling to others.

With that in mind, evaluate how much you require as a down payment before you begin working. You can justifiably ask for half the cost of the total project before you start — if you do not require that much now, hike your commission rate. Not only will it increase your cash flow, but it’ll also ensure clients are serious about paying you when the project’s complete. They will want a return on their investment, after all.

4. Lease — for now

It might seem counterintuitive to lease since you know leasing means you’ll end up paying more for your space or your supplies in the long run. However, you shouldn’t buy things outright when cash is tight. Instead, see if you can lease your workspace or the equipment you need to make your business a reality. That’ll give you more cash to use for day-to-day expenses and, once you’re running productively, you can invest more cash to buy the items you need.

Learn More: Cash Flow Basics — Key Concepts and Terms.

5. Scrutinize payment terms

You have money coming in and going out — how much time is there between these two events? Another way to boost cash flow is to evaluate the terms you share with your suppliers as well as your customers. If you’re required to pay the former within 20 days, but your customers have 30 days to pay for your services, then you have a considerable amount of time in which you’re reliant on your own cash.

You might want to reconsider the terms of payment with either end of your production process. Reaching out to new suppliers might help you find a bigger window for repayment. You might also see an even cheaper option that makes it easier for you to float between spending and receiving cash from customers.

Of course, your pre-existing supplier might be willing to negotiate with you, too. As long as they know you’re going to be a client for a considerable amount of time. Just make sure you’re smart about these discussions — take your time to find the right balance between your needs and your supplier’s needs. To that end, your clients might have to start paying for your services sooner to make the time between payments a bit easier on you.

6. Incentivize and penalize

In a similar vein, you might want to find ways to encourage customers to pay you ahead of schedule. On the one hand, you can come up with an incentive for them to pay early. A small discount is unlikely to hurt your bottom line, but it could make a big difference to clients. Knowing they’ll get this percentage off their bill will probably be enough to inspire them to get their payments in on time, thus putting cash in your pocket ASAP.

You might also consider implementing a penalty for customers who are routinely late with their payments. Adding interest to a standing debt, for example, will spur them to pay you back with haste. When they do, you’ll at least receive a little extra for your trouble.

7. Re-evaluate your prices

Selecting the proper price for your products is a delicate balance. Larger companies have their own tricks for doing it, but you might’ve gone with a simpler strategy — a number just enough to turn a profit, for example.

Unfortunately, undervaluing your products reduces the cash you receive per purchase, and it also makes your creation seem less valuable than it is. Customers and clients won’t take you seriously. If your number is too high, you won’t be considered, either. Instead, you’ll be lost in the fray to competitors who have chosen a better price for their products.

Don’t be afraid to adjust prices to boost cash flow. For example, slightly increasing prices won’t push customers away, but it will give you more money and add perceived value to your products.

Read More: Cash Flow Problems: 6 Top Causes.

Keep it flowing

No matter how great your business idea is, you need cash to keep it going. Implement any one of these tactics to boost cash flow and guide your business through any cash shortages.

You can also enlist the help of PayPie’s free cash flow forecasting to personalize your path to a healthy cash flow. No matter which avenue you choose, you, your customers and your investors will be glad you did.

PayPie currently integrates with QuickBooks Online to access the cash flow forecasting and risk scoring tools. Additional integrations are coming soon.

This article is informational only and does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

Image via Pexels.

Cash Flow Problems: 6 Top Causes

cash flow problems top causes

Many small businesses are only one late invoice away from a cash flow crisis. They face serious risks of losing everything they’ve worked so hard to build. One of the biggest reasons small businesses fail is due to cash flow problems.

Time and again, study after study shows that when a business fails, it’s due to poor cash flow. Twenty-two percent of small businesses say that cash flow is a challenge. That’s a pretty sobering thought.

Cash flow has the biggest impact out of almost anything else you can imagine. Fortunately, there are certain factors that lead to cash flow issues or a cash flow crisis. Knowing these factors lets you better protect your business.

This is the reason why PayPie wanted to provide you with six of the top causes of cash flow problems you’ll want to avoid.

Read More: Reporting, Cash Flow and Your Business’ Financial Health.

1. Lack of an Emergency Fund

No matter what type of business you run, there will be times when business booms. There will also be times when business stutters. When cash flows in, set some of the profit aside in an emergency fund.

You never know what life might throw your way, so having enough funds to cover a catastrophe is smart. If you’re one late invoice from failing — imagine the relief of having an emergency fund during to respond to unexpected cash flow problems.

Ideally, you should start your business with enough funds in place to cover emergencies, unexpected expenses and cash flow issues. However, if you’re already in business, you might not have planned for such a fund. In this case, throw every extra bit of money you can into your emergency fund until you have enough to cover any major issue.

2. Poor Invoicing Practices

Keep cash flowing into your business by invoicing on a schedule and following up on unpaid invoices. Most business people become so busy building their businesses they let paperwork fall behind, which can lead to cash flow problems.

If you don’t invoice your customers, they aren’t likely to pay you. Even if you have invoiced them, you may need to follow up. Remember they are busy, too.

You may also want to run a quick credit check on new clients. If they have poor credit, request at least a portion of the payment up front and as the work is completed. If you can’t keep up with invoicing, try investing in a virtual assistant to keep up on such matters for you. Online software also allows you to automate invoicing and reminders for unpaid invoices.

3. Unsynced Credit Terms

When setting up the credit terms for your customers, you also need to look at the credit terms from your suppliers. If your suppliers offer net-30 and you offer your customers net-60, you’ll likely encounter cash flow issues. Net-days can translate to nearly any number. Some suppliers only offer 15 days  (net-15), for example. Seek suppliers with the most generous net-days terms you can find.

Take the time to study your books and discover what terms each of your suppliers offer. Your terms to your customers should be less than the shortest payment time to your suppliers. This gives you some room in case your customer pays a bit late. The last thing you want is to owe your supplier well before your customer owes you.

A free cash flow forecast from PayPie will also give you insights into your accounts receivable cycle. Armed with this information, you can help anticipate and prevent a future cash flow crisis.

4. Growing Pains

Growing at a rapid pace is something every business owner dreams of. Then it happens, and you realize you don’t have the funds to supply that growth. Imagine a scenario where you’re mentioned by a social media influencer.

You suddenly have 100 new customers you didn’t have last month. Where does the money come from to buy the goods to supply those customers or pay the employees to provide a service?

When you gain an influx of new customers all at once, you then have to supply those customers. But, you haven’t been paid by them yet.

One way to avoid this is to change your terms before the growth hits. Ask for at least some payment up front before you send items to customers or begin work. Make sure it is enough to cover your expenses. When the customer pays the remainder of the invoice, you’ll get your profit. It’s easier to wait on profit than to hit negative numbers on the books.

Read More: Cash Flow Forecasting: What You Need to Know.

5. Not Monitoring Expenses

Over time, expenses creep in that you might not have budgeted for. Perhaps a supplier raises their prices, and you’re too busy to seek a new supplier. Perhaps your monthly rent goes up, and it’s too much work to move to a new location.

Whatever the cause of these creeping costs, if you don’t monitor them closely, the resulting cash flow problems can potentially overtake your business.

At least once per quarter, take the time to sit down and review your costs. Look at wages, supplier costs, rent and even things such as utilities. Where can you cut down on the costs or implement policies to reduce expenses?

6. Not Planning for Seasonal Fluctuations

Every business on the planet has slow seasons. For retail establishments, this is traditionally January and February. For other industries, it might be the winter months or the summer months or anything in between. Not planning for these fluctuations leaves you with unneeded inventory and lack of funding.

Don’t wait for the fluctuations to cause cash flow problems. Plan ahead. If you know that winter is slow for your business, then cut back on inventory the month or two before the slow season hits. Plan promotions ahead to up your income during these months, or use the time to travel to trade shows and drum up new business and clients.

Cash Flow Woes

Almost every business experiences cash flow problems at some point. Knowing the causes of cash flow issues allows you to avoid the inevitable pitfalls. With a little pre-planning and a lot of organization, your business will run like a well-oiled machine.

Instead of stunting your growth or killing your business entirely, overcoming a cash flow crisis gives a competitive edge by realizing the value of having plans in place.

Wondering just how much cash flow you need to keep your business healthy and thriving? PayPie offers cash flow forecasting.*

Get a free cash flow forecast today and get a handle on problem areas before they become a financial crisis.

We’d personally like to thank Sarah Landrum of Punched Clocks for contributing this post.

*PayPie currently integrates with QuickBooks Online. Additional integrations are coming soon.

This article is informational only and does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.