Do You Hear Something Dripping?

| Categories: Cash flow , Cash Management , Profit First , Revenue

Blog by Fuel Accountants

 

 

Ok, has this guy gone off his rocker? Now he’s asking me if I hear dripping? Yes, I am asking that. 

But let me explain:

We have run into situations where our clients have periods of high revenue, followed by periods of lower revenue. They are doing nothing wrong. It’s just that some businesses have a natural flow of revenue that roller coasters, depending on the calendar. We call that seasonality. And if that is the case with your business, then pay attention to this article!!

Do you remember the story of the grasshopper and the ants? The grasshopper lived day-to-day, while the ants stored up food for the winter. When winter time came, guess who fared better?

This same lesson applies to your business if you are experiencing seasonality with your revenue. You need to store up some cash for when the revenue naturally falls. We do that by adding a mechanism using our Profit First Cash Management System (PFCMS).

When we encounter seasonality, we set up a special account to accumulate cash for the “rainy season.” We actually budget for and set up an allocation account and begin building the cash up in it as part of our regular PFCMS allocations. That way when revenue slows down, this supplemental account can be used to shore up cash where needed. We call this a DRIP account because we fill it slowly until it is needed.

We encourage all our seasonal clients to do this in order to protect the cash in the business. And as we all know, CASH IS KING!!

Call us if you need help protecting your cash flow!! We are the PFCMS experts!!



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