How do you combat income variance and still pay your bills?
Planning for business expenses is perplexing but it does not have to be overwhelming. Depending on your industry, forecasting your revenue can be easy as pie, but how can you overcome the challenge of managing your expenses when your revenue stream is more volatile?
This year has been interesting in many segments of the economy. For example, if you work in the tourism sector, forecasting 2021 revenue and expenses has become a guessing game. This is why I suggest giving emphasis to your bookkeeping strategy. Often, I see business owners doing all of their accounting at once (near their fiscal year-end) but there are a few reasons why this is ineffective. Firstly, this method does not give you the advantage of real-time metrics and secondly, you cannot accurately predict how much cash you need to set aside for business expenses. Thirdly, if you only examine your books every so often, your business will have to inability to forecast the following year’s expenses and revenue.
What are the solutions? I suggest these methods to help your business positively:
- Make sure that your bookkeeping is completed bimonthly.
- Highlight the importance of month end reports.
- Forecast your monthly revenue and expenses.
- Anticipate payment due dates and create realistic business plans.
I also recommend opening multiple bank accounts and nicknaming them for specific purposes. Set up automatic payments into your new accounts and tailor payments relative to your gross revenue. It is often better to contribute more if you can afford to because your business revenue WILL usually fluctuate month to month and year to year.
I have seen many business owners struggle with cash flow stability and if you are also having difficulty, remember that you are not alone! Income variance is a challenging topic and I have a system that I would be happy to walk you through. Would you like to find out more?
FILL OUT A 2-MIN QUESTIONNAIRE TO QUALIFY FOR A FREE CONSULT: