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This post is in partnership with Intuit Quickbooks. This post contains affiliate links. Thank you for supporting brands who support TCM. As always, all thoughts, opinions, experience, and advice is my own.
As an entrepreneur you have to develop a certain amount of grit to weather the storms. Gone are the days of steady paychecks, and hello are the days of unpredictable cash flow. One month you could hit your dream number, and the next you could make a tenth of that. The highs and lows are part of the territory. However, you can still prepare to weather the various storms, despite an unpredictable cash flow at times.
How To Manage Unpredictable Cash Flow In Your Business: 7 Tips
An accounting software is essential for weathering the storms of unpredictable cash flow as an entrepreneur! You need to have somewhere to keep track of everything, figure out where leaks are, and how you can scale. If you aren't using Quickbooks yet, sign up here.
You wouldn't open a store with only one item you plan to sell, would you? Nope! Instead, you'd have a variety of items and try to keep up with demand. So whether you're running a service or goods based business, you need to adopt the same mentality of multiple revenue streams. Find ways to branch out and repackage things to meet the demand. This way you can have money coming in through various streams instead of relying solely on one thing.
Personally, my first year in business relied on me physically showing up to teach workshops. If I didn't show up, I made no money. If a client canceled, I made no money. I couldn't really scale the business since I couldn't clone myself. Thus, I needed to diversify.
I quickly began consulting with local businesses on their programs, and then eventually grew into full blown virtual business and career coaching. I launched the blog out of blind passion shortly after. A few months into blogging, I dropped my initial services and focused more of my efforts on the blog since it offered an even wider array of revenue options and I was more passionate about it. Through blogging, I've managed to open up revenue streams for sponsorships, freelance writing, selling the rights and licensing my work, speaking engagements, spokesperson opportunities, and so much more.
Quickbooks allows you too easily set up all of your revenue categories. This way as payments come in, you categorize them, and at the end of the year you can review. The end of year review is essential to assess what revenue streams are worth more of your energy and which you may want to drop.
Using the reports feature in Quickbooks you can notice trends for your different revenue streams. Usually during Q1 and Q4 sponsorships tend to go up for me, and then calm down in the summer months, where I may pick up more speaking engagements and spokesperson opportunities. Being able to see these trends in my reports makes it easier to figure out where to reinvest my time and efforts and adjust accordingly.
If your business doesn't have a budget, it's going to add a lot of unnecessary stress. Make sure that budget includes paying yourself each month! This way your business expenses become more of fixed costs, and you can figure out how much cash you actually need consistently each month. It becomes more challenging to plan for dry spells if you're inconsistent with how much you're paying yourself, or contractors, or spending on office supplies each month since things become so variable.
Since you're already in Quickbooks, you'll also want to see where your dry spells are most likely to occur. If you aren't really established in your business yet, ask around and do some research to understand market trends. If you've been in business for a little while, you can look at an overview to see how the trends have played out in years past.
Once you have some insight on the predictions for the high and low spells you can make smarter choices about which investments you'll make into your business and when. Perhaps adding someone to your team for Q4 will allow you to increase productivity when demand is at its highest?
On the flip side, if Q4 is typically your “slow” season, you may want to leave all the money in your business to prepare for paying your taxes at the end of the year. If you have no clue how much you'll owe for taxes – or your stomach just sake after reading that statement – I'd highly suggest setting up Quickbooks if you haven't already. Quickbooks will make it easy come tax time to add your accountant to the software, allow you to run reports and get a rough idea of what you'll owe. Quickbooks also takes care of all the forms and essentials for the W2s and/or W9s you're responsible for with just a click of your mouse.
Regardless, one of the best ways to prepare for dry spells in my experience, has been keeping a certain amount of cash in the business that can cover expenses for a few months.
This could probably be it's own post in itself! Start be looking at where your leaks or delayed payments are happening. This could be paying high processing fees to accept payments from customers or simply receiving late payments continuously from people, amongst tons of other things. Personally, my biggest pain point was people paying late. I learned to avoid this by changing the terms and how I accept payments. Today, I ask for payments upfront and build in a late fee if the payment arrives or is post marked past the due date. You'll want to set up reminders and alerts for yourself so that invoices are followed up with and tracked accordingly.
Set up a time each week to sit down and review your Quickbooks account. Categorize your transactions for the week, check in on invoices, bills, payroll, inventory, and the like. Using this time to get organized will allow you to spot the trends, run reports, and roll with the highs and lows of entrepreneurship much easier. I'd personally rather spend 10 minutes a week checking my accounting software than constantly feeling stressed about the unknown or have to spend hours upon hours cleaning up a mess that I could've been managing with ease.
How have you managed unpredictable cash flow in your business?
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