There are numerous financial issues that small business owners must be aware of, but one of the most valuable pieces of financial advice is to define your small business’ sales cycle.
When it comes to sales cycles, many assume that only seasonal businesses are affected. Landscapers, ice cream shops and costume stores are some examples of those clearly impacted by seasonality. But, even restaurants are affected.
Regardless of your industry, your business follows a sales cycle of some kind. Learning your cycle is critical to maintaining proper levels of cash throughout the year and ensuring that you’re able to pay your bills.
Learning Your Sales Cycle
To determine your business’s unique sales cycle, you must have historical data to review and look for patterns. For younger companies, this is often difficult. However, there are resources to turn to for context. Talk to others within your industry and lean on your small business advisor to gauge what your sales cycle may look like.
Naturally, you need to keep accurate records in order to have financial reports that provide data worth reviewing. With accurate and up-to-date financials, you and your small business consultant have the information you need to determine your sales cycle.
Learning your sales cycle and getting impactful financial advice for your small business helps you identify:
How much cash must be set aside
When cash must be set aside
Proper inventory levels throughout the year
Optimum staffing levels
With this information, you’re empowered to plan for future months and quarters and to develop financial forecasts – a key to streamlining your cash flow.
Sound Financial Forecasts Protect Your Bottom Line
While your small business moves through its sales cycle, financial forecasts help you smooth out the ups and downs. Without sound forecasts, you run the risk of having little financial flexibility in your slower months.
While your sales cycle is a key variable in financial forecasting, keep in mind that sales and cash inflow aren’t necessarily the same. Your forecast is based on an estimate of when cash is coming in and how much, as well as the amount of expenses you have and the periods in which they must be paid.
If you’re able to identify your sales and business cycles, you’ll protect your profits and save yourself from anxiety in your tougher months. Streamline your small business with this financial advice, and seek help from a knowledgeable partner when their expertise is necessary.
Talk to a small business consultant to get more financial advice that helps you save more of your hard-earned money.