Managing Fluctuating Revenue – Building Financial Resilience

Business earning Fluctuating revenue over a year

It is common for businesses to have fluctuating revenue owing to the nature of the business – Hospitality sector tops of the list with other non-subscription based businesses too facing the brunt of some fluctuations over a year.

The big question is – how do you as a business owner handle cash flow when there is fluctuating revenue month on month?

The key is being on top of profit distribution.

Business outflows - List down all the monthly fixed costs your business needs to run.

Growth – Your business needs money to grow. A way you can make those growth goals come into reality is to set SMART goals (Refer to this article to learn more about SMART goals). Calculate how much you need to set aside monthly for those goals.

Personal budget – Now this becomes tricky. While you may have a number for those fixed bills and your personal SMART goals, at least 30% of monthly expenses happen to be variable. So, you will have to exercise judgement in how much you would need monthly to lead a comfortable life. One guiding point could be market rate salary of a similar job with similar level of experience.

Now that you have three key numbers your profits should be divided into month on month, this will help you take control and stay organised inspite of fluctuating revenue.

How to go about it?

At the end of the month out of the profits you have made – transfer these three figures into respective pots – One-month fixed cost in your business account, growth savings into respective saving’s account/ISAs and your personal budget into your personal account.

The balance money goes into a savings account/ISA which will function as a Business Cash reserve.

This cash reserve will fill in the three numbers above during months your business is making low or zero revenue.

This way you maintain money hygiene in both your business and personal life allowing for peace of mind.

You can be rest assured that all your important outflows are covered, and all your goals can be accomplished while not being too worried about your fluctuating revenue.

Make money your ally!

Written by

Mrudula Muralidharan

Founder and Finance Coach

Million Goals