By Grant Jackson
It’s important for any business to make sure that you have a war chest of funds available. If you’re making money during the season, then don’t spend all of your profits during the season. Make sure that you keep some cash reserves aside in anticipation of needing that extra cash, because it’s not necessarily the drawing down on the cash that causes the problem… rather, it’s the sudden increase in orders and the sudden increase in the need for raw materials or stock (or whatever it is that forms part of what you’re selling) that causes the problems down the line.
If you’re planning ahead, then you should factor that in before you pay yourself that nice bonus at the end of the year, or the drawings that you might take during the year. Plan your personal budgets and the amount of cash or salary that you need to pay yourself early year. Plan for that, but make sure that there are sufficient cash reserves left in the business to be able to cover these kinds of problems or demands when they arise because, for some businesses, you might not have the bankers to fall back on, you might not have sufficient securities, or whatever other mechanisms are necessary for the bankers to provide that cash.
That’s why the best thing to do is to become your own bank, and to do that you need to try to retain as much of your profit as you can while you’re busy building up your business and becoming stable.