As business owners, we are tasked with keeping our businesses financially sustainable. Cash Flow is the lifeblood of a healthy business. 

Often, unexpected things occur in our business which are impossible to plan for such as a war, a commodity shortage, a sudden economic downturn, etc. For the unexpected, a business can protect itself by building cash reserves and having a health line of credit to tap into. 

However, often events occur that are predictable in nature and occur annually. 

To illustrate, a squirrel works diligently in preparation of the winter, storing acorns in multiple locations to tap into. Many businesses are seasonal in nature with peaks and valleys of activity and cash flow throughout the year. 

Some examples to illustrate:

Landscaping Company/General Contractors: Significant activity during spring and summer; limited activity in fall and winter. 

Wholesale/Retail: Cash outflow to invest in the new line of inventory. Large cash inflow during peak sales times such as preceding holidays. 

Annual Subscriptions: Large cash inflow prior to main month of annual renewals. Steady cash outflow other months. 

CPA Firms: Large cash inflow month following tax deadlines, steady cash outflow other months.

Businesses catering to Frum Population: Significant activity before yomim tovim. No activity during yom tov, 3 weeks, sefiras haomer depending on the nature of your business; limited activity in fall and winter and holidays. 

Healthy businesses are not cash positive every month. That is not a red flag or an indication of a problem. Even when responsible for the cash budget of a Fortune 100 company that did billions of dollars of business a year, there were known months where the business would have major cash crunches.  

Here are some best practices we coach our clients to implement:

Document your seasonality: No one knows your business better than you. Spend the time to document your peaks and valleys. 

Build a cash projection: Start with your current cash balance. Build in your expected cash inflows and outflows including large 1-time expenditures. Also, layer on your recurring net cash flow. For example, if you are typically cash flow positive or negative by $20k, layer that on as well. Use this as a barometer for where you will have your cash peaks and valleys. 

Plan Accordingly: Using your cash projections, use your cash valleys as a starting point and work backwards. Are you in a sustainable cash basis as is? Do you need to borrow? What liquidity resources do you have at your disposal to rely on? 

Do you have a line of credit that has room in it? Do you have credit cards that can hold you over for a month or two? What terms do you have with your key vendors? 

Do your part to prepare your business. At times of cash abundance, take your equity draws and pay off your large bills which are outstanding. Use these best practices to keep your business healthy and protected during the known cycles.