Looking for a way to plan cash when the year will not hold still? Steven Palmieri, a Tax CFO, starts with a simple idea. You do not need to know the size of the next dip. You need to know what a dip looks like in your own business, and that is already written in your books.
A plan built on guesses goes wrong the first time the guess is wrong. A plan built on closed months knows how much a good month really brought in, how much a bad one really cost and how long it took to recover. That is why the first job is a clean close. The bank is matched to the books, the cards and loans agree, and the owner's draws are kept apart from wages.
With twelve closed months in hand we can mark the swings. March might belong to the Rodeo for a restaurant or a hotel. Summer might be the slow season for a landscaping crew and the busy one for an air conditioning company. You know your own pattern. We write it down so the plan can use it.
Once the months are closed, we build a rolling view of cash. It shows the coming weeks one at a time and the months after that in larger steps. For each stretch it lists what should come in, what has to go out and what is left in the bank. Each time a month closes, the view moves forward and gets corrected by what really happened.
You will not get a stock answer from us about how many weeks of cash a healthy business holds. No source that we trust names one, and a number borrowed from another industry would only mislead you. The right cushion is the one your own bad month calls for, and building a cash reserve walks through how to size it.
Most owners can name them quickly. A big customer who orders in waves. A price that moves the work you get. A storm that closes the doors for a week. A season that fills the calendar and then empties it. Write those down first, because the plan only needs to handle the few things that actually move your year. The rest is noise.
If your swings are about the weather, the page on hurricane season and your cash goes further. If they follow an oil price, see when oil prices move your revenue.
In the quiet months, the one decision to make is how much to hold back before the next busy or stormy stretch. That is also the time to ask a bank about a credit line, to buy the equipment that has been waiting, and to decide whether this is the year to hire. These choices are easier when nothing is on fire, and they cost less when you are not rushed. Every swing page on this site asks you to make one such decision on purpose.
Say a company brings in $120,000 in a strong month and $70,000 in a weak one. Fixed costs are $85,000 either way. The strong month leaves $35,000 on the table. The weak month is $15,000 short. If the owner takes the full $35,000 as a draw, the weak month has to be funded from the line, and the line may not be there. If $20,000 stays behind, the weak month gets covered and the cushion is still $5,000 higher than before. This is only an illustration and not a result for any real business.
Between closes, keep an eye on three things. The bank balance, the invoices that are due to arrive and the bills that are due to leave in the next two weeks. That short list takes five minutes. We will help you choose it so you are looking at the numbers that matter in your business and not a dashboard full of them.
A planning year also changes the tax side. Estimated payments are set from the months that have closed, so a weak quarter does not pay like last year's strong one. Owner pay is chosen with the reserve in view. The return at the end comes from the same books, so nothing has to be rebuilt.
Bring last year's bank statements and we will mark your swings together on a free Second Look call. Nothing to sign and nothing to pay.
You will be talking to the Steven Palmieri practice.