Cash Flow Projection For Better Business
Creating a cash flow projection is important because you can run a successful business and still suffer from poor cash flow management. Seasonal businesses like gyms and fitness clubs are especially susceptible to cash flow mismanagement, but it also means that your cash flow projection would be much more accurate as you can predict when your revenue peaks and declines, depending on the time of the year.
#1: Budget for a Cash Flow Projection
All businesses have budgets, but businesses with on-peak and off-peak seasons should plan yearly budgets that include cash flow projection as well. This allows you to predict your future earnings and spending more accurately, which then empowers business owners to make better informed financial decisions. For best results, use historical reports to forecast your future revenue while also taking into account your fixed expenses (like utilities and rent) and your variable expenses (including your inventory, taxes and salaries). You are now ready to develop strategies to manage your cash flow for the rest of the financial year. For more info on how to solve cash flow problems before they actually happen, read our #cashflow tip Day 15 here.
#2: Steam Roll Your Invoices
Plan to minimize the fluctuation of your cash flow cycle by introducing cash upfront invoicing during quiet seasons. Alternatively, business owners can also consider securing a percentage of payment upfront so there will be no issues operating the business throughout the quiet period.
#3: Know Your Suppliers
Besides injecting more money into your cash flow, you might also want to slow down the exit funnel. To do this, spend some time negotiating with your suppliers for extended payment terms. This is especially useful for nearly on-peak seasons when you need to stock up on inventory before the busy peak season begins, but your cash flow projection indicates that money will be tight during that period of time.
#4: Earn More Money
Find alternative sources of income either by offering more products or introducing new fitness classes or health-related service. This temporary promotion can boost interest in your business, increase cash flow capacity and is also a great way of increasing your membership sign-up rates.
#5: Use Your Off-Season Wisely
To quote the wise Sun Tzu, “To be prepared beforehand for any contingency is the greatest of virtues.” Off-peak season is the best time to take that long overdue holiday and reflect on how your business can perform better the following year. You might also want to consider throwing in a marketing campaign or introduce new products or services the following season. Don’t forget to also check on your competition for some healthy comparison!