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How to Forecast for Irregular Cash Flow?

A cash flow forecast is an excellent way to be on top of your financial spending. It helps plan out your cash available so that all the transactions are processed without any liquidity crunch. But this becomes quite challenging if the nature of your business is such that the cash flow is non-uniform throughout the year. In such cases, one must comply with different strategies to consider all the factors. Therefore, to make cash flow forecasts easier, here are a few helpful ways to ensure that the irregularities do not cause any bottlenecks in daily business affairs.

Make a Budget

A budget is a necessary step in any business. However, in the case of irregular cash flow, it becomes easier to keep track of cash with budgeting. It helps determine the spending spending, incomes, and irregularities in these transactions.

Track all receivables

While understanding and maintaining a certain cash flow, it becomes essential to ensure all the receivables arrive on time. This will ascertain that the cash flow is not overburdened with unnecessary stress and that the monthly transactions run smoothly.

Make Individual forecasts for each month.

Usually, in small businesses where cash flow is irregular, the monthly cash available varies greatly due to numerous factors. Therefore it is wise to handle each monthly case individually. This simplifies the entire process while making it easier for business owners and staff to comprehend. Also, this is a great way to be thoroughly equipped for months with less cash flow than others.

Identify your recurring expenses from your one-off costs.

Your recurring expenses are your EMIs, office rent, employee salary, etc. These expenses vary significantly from your one-off expenses. That is because these expenses are way more predictable than one-time purchases and, therefore, more manageable. One-off expenses are most of the time unexpected. For instance, you are replacing a new piece of equipment because the one you had is broken beyond repair. Or you have to hire new people because of a surge in demand. These expenses should be treated differently as they have different outcomes.

Recognise Seasonality in Sales

Most small businesses have irregular cash flow because of the seasonal nature of the company. Some items or services gain a hike in demand in certain seasons. Moreover, some weeks such as the Christmas season, see the highest growth in revenue compared to the whole year. It is best to treat these seasonal growths or slumps differently than regular months.

Irregular cash flow is widespread in businesses. There are always “peak seasons” for some weeks or unexpected growth in sales in other weeks. To manage this abrupt cash flow of income, small businesses must seek guidance from their accountants.

Consider MAS for your small business accounting need

Maintaining a good cash flow, filing taxes, and planning your growth strategies are all very important tasks for running a business. However, it is best to leave these to professionals like us so you can focus on other areas. Contact us here to get the best small business accountants in Sydney and Zetland.