Not every business has a steady income, which can make cash flow forecasting feel like quite the chore. One month may be incredibly healthy, while the next might be uncomfortably quiet. Planning ahead can feel risky rather than reassuring.
This type of irregular income is common for freelancers, agencies, seasonal businesses, and more. Cash flow forecasting still works when income is uneven, but it just needs a different approach – one that focuses more on visibility rather than precision.
Read on with Brixx to see how forecasting works with irregular income, without relying on unrealistic assumptions or static spreadsheets.
Why does cash flow forecasting feel so difficult with irregular income?
Uncertainty is the biggest problem when it comes to a fluctuating income. You know that money is on the way, but not necessarily when or how much. This makes it harder to commit to expenses, to grow, and even to pay yourself.
This type of income also tends to encourage a more emotional type of decision-making. A good cash-heavy month can lead to optimism and increased spending, while a quieter month could lead to panic and short-term decision-making. By trying to forecast, the business will have further context, which won’t eliminate uncertainty but does make it visible enough to plan ahead.
It’s important to bear in mind that forecasting cash flow is not the same as budgeting. A budget helps to plan on how to spend money. A cash flow forecast helps to show when money is coming in and out of your business. For irregular cash flow businesses, the timing of these events matters far more than having perfect accuracy.
How to make it easier to forecast with irregular income
Start with a baseline built from real data
In order to forecast forward, you have to look backwards. Even if income feels chaotic, patterns do exist if you zoom out far enough. Reviewing the prior year of inflow and outflow can reveal a realistic range of outcomes.
Begin by identifying your averages. Identify the quieter months, then the more typical months, and finally, the stronger months. This creates a baseline from experience, not guesswork. The aim isn’t to predict the next set of invoices with utter clarity, but to understand what normal looks like in your business.
By utilising financial forecasting software like Brixx, you can start by integrating your existing Xero accounts. Bring in the historical data, and assess from there.
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Understand which of your costs are absolutely essential
Some costs exist regardless of how much income is earned. Depending on the business, this can be rent, software, subscription costs, and more. Other costs can be more flexible, even if doing so is uncomfortable. In other words, you have to pay rent, but you don’t have to pay for ads.
For irregular income businesses, keeping these costs separate is key. Once you know exactly how much is required to keep your business running, you can plan with greater confidence. The quieter months no longer need to be a crisis.
By having this distinction between the types of costs, it’ll help you as the business owner to stay alert. In a strong month, it’s easy to feel secure, but those persistent costs don’t disappear when the income dips. Forecasting keeps these obligations visible.
Forecast different scenarios
A common mistake when it comes to forecasting irregular income is forecasting a single scenario only. This can lead to disheartening situations and excessive stress if figures don’t match what the business anticipated.
Forecasting multiple scenarios makes your business more resilient. Start with a lower-range forecast, anticipating slower periods of time. Forecast a middle ground, anticipating a more realistic situation. Finally, forecast a higher revenue scenario, for a best-of-the-best outcome.
Ensure that timing is reflected properly
Businesses that earn a consistent income can still struggle with forecasting if timings aren’t correctly reflected – so businesses with irregular incomes have to be extra careful to track their timings! Invoices, long payment terms, and late-paying clients all create gaps between when revenue is earned and when cash is received.
Forecasting cash flow should reflect when the money is expected to arrive, not just when it is earned. This is particularly important for businesses that are service-based, where work may be completed weeks before payment is received.
Rolling forecasts can help to address this issue. Rather than creating just one forecast and hoping that it remains correct, rolling forecasts work on the basis that you adjust it as invoices are sent, payments are delayed, or new work is confirmed. This turns forecasting into an ongoing process rather than a static document.
Use your forecasts to make better decisions
Cash flow forecasts are valuable because of the decisions that they help to inform. Forecasting will tell you when you can afford to hire, or when you can invest back into your business.
For businesses earning irregular income, forecasts can highlight when you should be cautious and when you can be confident. If you plan for multiple scenarios, you can step forward knowing that your risks are reduced.
By using a financial modelling tool like Brixx, you can make this process so much easier. Adjust your assumptions in an instant – and see those outcomes calculated just as quickly. Use the full features of Brixx to turn your forecasting into a system that supports your decision-making. Don’t stick with static reports that will never be updated again.
Remember that forecasting is a practice, not a prediction
If your business has an irregular income, your numbers will likely never be exactly right. What we’re trying to recommend is that you build a healthy habit of constantly looking ahead. Forecasting with this type of income is not impossible – but it is essential. By working with your numbers and adjusting them in real time, you can reduce your uncertainty and thrive in the future, even when income behaves irrationally.
Get started today with a free 7-day trial and see how Brixx can work for you.
