Forecasting 101 – predicting your ‘quiet’ and ‘busy’ months

Running a service business is incredibly rewarding, but cash flow can sometimes feel like a rollercoaster. One month you are completely rushed off your feet, and the next you are waiting for the phone to ring. The busy and the quiet months aren’t always the same, and they’re not as obvious as it is to product businesses.

Building systems for the long haul means preparing for both of these extremes. That is where forecasting comes in. The word itself sounds a bit corporate, but it is really just an educated guess about your future income based on what happened in the past.

Spotting your patterns

If you have been trading for a year or two, you already have all the data you need. Look back at your bank statements or cloud accounting software to find the natural rhythm of your business.

• Identify the peaks: When did sales hit their highest? When did you get the most amount of new enquiries?
• Notice the slow payers: When did invoices take longer to clear?
• Find the quiet gaps: Are there seasonal dips, such as the summer or Christmas holidays? Or is it just a random month in the year?

Once you spot these trends, you can build a reliable system to manage them. If you need help getting your records straight first, check our our blog post on best practice for small business accounting.

Preparing for the peaks and troughs

Seed Accounting Tip: Use your quiet months to work on your business, not just in it. Get ahead of the curve whilst you have the brain space and the capacity. Plan your socials, draft blogs, do the forecasting for your business (!), and also, take time to just enjoy the slower pace. It won’t last.

Knowing when your quiet months are coming means you can save a cash buffer during the busy times. A quiet patch is not a bad thing. It gives you a much-needed chance to plan your marketing, catch up on admin, or simply take a well-deserved holiday.

During the busy months, your systems need to handle the extra work without burning you out. Make sure your invoicing is automated and your tax savings are put aside early. Ensure you have systems in place, and automations to carry the heavy duty stuff. It is also smart to keep on top of your tax deadlines so you are never caught out when cash is tight. They come around regularly!

Frequently Asked Questions

• What is a cash flow forecast? It is a simple written plan showing the money you expect to come in and go out of your bank account over a set period.
• How far ahead should I look? For most small and micro businesses, planning 12 weeks in advance is a brilliant sweet spot. It is far enough to prepare, but close enough to be accurate.
• Do I need fancy software? Not at all. A basic spreadsheet works perfectly to track your expected income and bills.