Multi-Unit Franchisee Magazine Issue III, 2015 | Page 70

Finance BY STEVE LEFEVER AND ROD BRISTOL

Are You Seasonally
Adjusted?

Keeping on top of annual cash flow fluctuations

A

s we enter summer each year,
businesses with a seasonal sales
cycle can change significantly.
If you are lucky, this is your
busy season with expanded revenue and,
hopefully, expanded profits and cash flow.
If you run a business that has diminished
summer sales, you are in for the belttightening process of reduced revenues
and cash flow.
Either way, it’s critically important to
understand patterns of cash flow—and how
to best prepare for the seasonality of sales
that most businesses experience during
the course of a year. Our goal as owners
is to determine the pattern of cash flow
in our businesses and plan for adequate
cash to cover expenses and repay debt. It
is also important to clearly understand
the difference between “seasonal” cash
requirements and your long-term growth
capital needs.
1) Planning for cash flow. Planning
is critical. Start by looking at what happened in the past in your business, then
assess what is going on now. Next, begin to think about what you would like
your business to look like over the next
12 months. A lot of things can affect this
plan: new competition or summer road
construction, for example. However, the
more we plan, the more our thinking is
refined, and the closer we can get to our
cash flow goals. The critical tool to help
in this process is your cash budget (which
is very different from the other two key
financial tools used by every business
owner: your income statement and [