Cash Flow Budgeting This Summer (2022): How Are You Progressing Toward Your Financial and Operational Goals?

by Fully Accountable | Jun 8, 2022 | Money Management

Cash flow budgeting is a critical part of business success and you should understand how to maintain a positive cash flow throughout all of your business’s seasons. In this article, we’re taking a deep look into how businesses can maintain a positive cash flow this summer.

From identifying peak on and offseasons to adjusting your inventory levels and forecasting your cash flow, this article looks at how businesses can maintain a positive cash flow throughout the summer. It also looks deeper into how businesses can analyze how their sales fluctuate throughout the year to create a more comprehensive and adaptable cash flow strategy.

If you’re wondering how to plan a proper cash flow budget, look no further. At Fully Accountable, our financial professionals understand how to tailor your accounting strategy to maximize your profits and stabilize your business model. With digital accounting software, a full-service team of financial professionals, and a commitment to impeccable digital accounting services, we can ensure you stay on top of your cash flow plan year-round.

Identify Peak On and Off Seasons

Planning your summer cash flow strategy will differ depending on your industry. You must first understand when your most profitable seasons are and when you are liable to enter a lull. Depending on your products and services, seasonal cash flows typically peak during either summer or winter. You will likely be able to identify these two points but the exact starting point of the upward curve will require extensive research.

Additionally, your business might have a sharper curve than others. Regardless of your upward and downward trends in profitability, once you understand these curves, you will be able to better plan for your cash flow. Try improving your product or service during your down season and maximizing sales during your peak season to achieve optimal cash flow balance during both times.

Adjust Your Inventory Levels

Analyzing your high and low seasons will help you identify the optimal inventory levels for your business. You should revisit these levels frequently to determine the demand within your cycle. You can’t forget that the demand cycle can also affect the volume of your orders and their volatility. Your inventory numbers should account for sales cycle demand and volatility. For example, you might want to increase buffer stock when volatility is higher.

Understand Your Costs

You can’t take advantage of your cash flow unless you thoroughly understand what is going out and what is coming in. Understanding your cash flow will help you identify both fixed and variable costs, which play heavily into how you create a budget. Examine which fixed costs are necessary and which you can cut to take full advantage of your cash flow plan.

Though you are more likely to save on variable costs, you likely won’t need to pay all your bills year-round. For example, if you have seasonal facilities, you shouldn’t be paying for utility costs year-round. You should also review all of your software licenses and subscriptions to get rid of those you don’t need for peak season.

Forecast Your Cash Flow

To adjust to cash flow issues, you need to be able to forecast all of your budgets. You should be able to analyze your cash flow for at least 12 months and predict it as far forward as 18 months. If you do this well, you will be able to predict seasonal cash flow problems in advance and adjust.

Businesses often use cash flow forecasting to help during times of financial trouble. However, healthy businesses can also use cash flow forecasting to uncover liquid cash reserves available at all times. By remaining aware of the required expenditures and when you will need to pay them, seasonal businesses can protect themselves from unexpected obstacles that can potentially lead to cash shortages during the offseason.

Uncover New Sources of Revenue

Off seasons give businesses the opportunity to reevaluate their cash flow initiatives. They can do this by forming a complementary sales channel for a product or service or developing a new product or service to add to their offerings for their high season. Finding innovative ways to improve your revenue helps your business pivot in the offseason so you can maintain a higher level of cash flow.

Create a Budget and Stick to It

While many businesses have seasonal schedules, many of them map out their long-term business initiatives during the year. They plan with long-term goals in mind and shift their goals as needed. Budgeting is essential for any company that wants to stay positive in the long term. And more importantly, it’s not just about the companies that create a budget. You need to stick to a budget.

Identify clear objectives and decide how you want to achieve those objectives. Cash flow forecasting and budgeting are essential for any seasonal enterprise and with them, you will maintain your working capital throughout the year. Additionally, analyzing when your slow season will start and paying attention to the times of the year when you have the most fixed and variable expenses will be able to help you further plan out your cash flow initiatives in advance.

Refine Your Forecasts

Forecasting your cash flow takes extensive planning and you should revisit your plan every month. Once you finish the month, you should record what worked and what came up short. This way, you will be able to modify your existing plan to ensure you have a complete program at all times.

Updating your cash flow regularly will help you update your forecasts, identify cash shortages, and benefit from higher revenue periods when you have cash surpluses. Digital accounting software can simplify this process greatly.

Understand Best and Worst-Case Scenarios

Understanding your cash flow isn’t only about understanding the best-case scenario for your cash flow plan. It’s also about being prepared for the worst. A cash flow scenario where you create flexibility for yourself is advisable. Creating a flexible cash flow scenario helps you explore whether you will need to apply for a loan, line of credit, or another funding source during the tougher financial times.

Secure a Business Line of Credit

Even after creating a complete cash flow forecast, you will likely encounter times of unexpected expenses, lower revenue, and larger purchases. Unforeseen costs are an inevitable part of running a business and your cash flow plan must be prepared to handle them. Business financing is an excellent backup plan during these times.

Thinking ahead and analyzing your financing options should take you up to several months before approaching the slow season. You should make an appointment with your bank to discuss your financial needs and you might be able to secure a line of credit at a lower interest rate than other forms of credit. To do so, banks typically need to see your business plan. Consider creating one as soon as you can.

Conclusion – Cash Flow Budgeting This Summer

Whether your business has a down season in the summer or you’re in a high season, you need to make sure you stay on top of your cash flow initiatives. Planning your cash flow with outsourced financial management services such as Fully Accountable ensures you are prepared for all the curveballs the year throws at you.

Devise a plan for your cash flow strategy with the experts at Fully Accountable and don’t leave any funds on the table this year.

Contact us today to start planning your cash flow.

Owner at Fully Accountable | Website | + posts

Fully Accountable is an outsourced accounting and fractional CFO firm that specializes in ecommerce accounting for online businesses. As a Inc 5000 fastest growing companies award winner, our diverse team of accountants, bookkeepers and CFOs can help you improve your cashflow and effectively manage and grow your bottom line.


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