Managing Cash Flow Through Peaks and Valleys

Cash flow is defined as the money your business has left over from sales after paying salaries, taxes, bills and loan expenses.

restaurant owners review cash flow statements

Unlike profits, which represent the total amount of money earned over a given period of time, cash flow shows exactly what you have on hand and excludes funds that are tied up in inventory, unpaid invoices and other potential forms of income.

The Stages of a Cash Flow Cycle

The cash flow cycle, also called the cash conversion cycle, begins when you receive payment for goods or services. This money then goes towards expenses, including what you’re saving for unforeseen expenditures or emergencies.


The remaining cash is used to purchase more inventory to replenish what was sold. If you’re managing your business correctly, you should have money left over at the end of the cycle.

What Inhibits Steady Cash Flow?

Several factors influence how smoothly the cash flow cycle goes:

  • Seasonal sales common to many hospitality and retail businesses
  • Large, unexpected payments for repairs or equipment
  • Customers delaying payment on outstanding orders
  • Replacing inventory after a surge in demand

It’s not uncommon to experience one or more of these “peaks and valleys” over the course of a year, but smart planning and money management strategies can help keep your business operating even when there’s not a lot of cash coming in.

Making it Through Ups and Downs

Cash flow cycles should be taken into consideration when drawing up a budget for the coming year. Plan for predictable changes such as seasonal fluctuations by using past cash flow records as a guide.

Keep an eye on pricing trends from your suppliers to make accurate projections about how much future inventory orders will cost you.

cash flow statements

Create a savings strategy that will provide enough available funds to cover expenses during lean times, and add in extra for any unanticipated payments that may come up.

Part of your strategy should include having a pre-approved business line of credit that can be tapped at any time. A line of credit obtained through ARF Financial puts up to $450,000 at your disposal without the need to put any collateral down.

Tips for Better Cash Flow

In addition to planning for periods of slow cash flow, there are steps you can take to ensure that you’re maximizing all available revenue sources throughout the year:

  • Increase inventory turnover to reduce the amount of cash you have tied up in unsold goods.
  • Renegotiate payment terms with vendors.
  • Contact service providers to find out if better deals are available.
  • Cut back on unnecessary expenses.
  • Determine if any upcoming large purchases can be delayed until cash flow is higher.
  • Take advantage of all possible tax incentives and deductions.
  • Re-evaluate your pricing strategy and adjust prices upwards as necessary.

Careful assessment and execution of these points has the potential to free up a great deal of cash to support ongoing operations.

The time and diligence you put into managing your cash flow will pay off for your business in the long term. No matter what the financial outlook is at any point during the year, you’ll be able to keep moving forward toward greater growth and success.

Apply today and get pre-approved for a business line of credit that you can tap whenever you need it!