General information for small business owners, not financial, tax or accounting advice.
Cash flow is the money moving into and out of your business over a period of time. Money in comes mostly from customers; money out goes to suppliers, staff, rent, fees and loan payments. When more comes in than goes out, cash flow is positive. When more goes out, it’s negative, and you’re living off whatever is already in the bank.
For market vendors, food trucks and seasonal shops, cash flow is often the harder problem than profit. You can have a good year on paper and still find yourself unable to cover a bill in March. This guide explains why, and gives you a simple 13-week forecast to see the tight spots coming.
What cash flow means for a small business
Picture your business bank account over a month. Every week, you can list:
- Cash in: cash sales you deposit, card payouts from your processor, any refunds from suppliers.
- Cash out: stock and ingredients, wages, rent or booth fees, fuel, insurance, loan payments, equipment, and money you take out for yourself.
Cash flow is the difference. Starting cash plus cash in minus cash out equals ending cash. That’s the whole idea. The skill is in seeing it before it happens.
Cash flow vs profit
Profit is measured on a profit and loss statement. It matches each sale with the cost of the goods sold and the expenses of the same period. Cash flow only cares about when money actually moves.
The two drift apart for a few everyday reasons:
- You buy stock weeks or months before you sell it.
- Loan repayments take cash but only the interest counts against profit.
- Equipment costs cash now, but its cost is usually spread over years on the P&L.
- Owner draws leave the account without being a business expense.
- Card payouts arrive a day or more after the sale.
We walk through a full example of this gap in what is net income. The short version: profit tells you whether the business works, cash tells you whether it can pay this week’s bills.
Why profitable seasonal businesses run short of cash
Seasonal sellers get squeezed from both sides. Sales come in a few big months, but many costs arrive before the season or keep running after it ends.
You spend before you sell
A holiday gift shop buys stock in September and October. A farmers market vendor buys seed, plants and supplies in late winter. A food truck pays for permit renewals, a new generator and a first round of stock in spring. The profit on those purchases shows up months later.
Fixed costs don’t take the winter off
Insurance, storage, loan payments, phone and software subscriptions keep coming in the quiet months when sales are close to zero.
Event deposits come early
Popular markets and festivals often want booth fees paid well before the event. Book a strong summer lineup and you may pay several deposits in the same few weeks of spring.
Big bills land in lumps
An annual insurance premium, a sales tax filing, estimated tax payments if you make them, a truck repair. Any one of them can empty a thin account.
Growth eats cash
Adding a second market day or a new product line means more stock and often more staff before the extra sales come in. A business can grow itself into a cash shortage.
A simple 13-week cash flow forecast
Thirteen weeks is one quarter. It’s long enough to see a tight spot coming and short enough to estimate honestly. You can do this in a spreadsheet or on paper in under an hour.
- Start with today’s cash. Use the actual balance of your business account, plus any cash on hand beyond your drawer float.
- Estimate cash in for each week. Base it on the same weeks last year, adjusted for events you’ve booked or dropped. Count card sales in the week the payout lands, not the week of the sale. Leave out sales tax you will need to pay over.
- List cash out for each week. Put known bills in the week they’re due: rent, loan payments, insurance, booth deposits, payroll. Then add your usual weekly spending on stock, fuel and supplies.
- Work out ending cash. Starting cash plus cash in, minus cash out. That becomes next week’s starting cash.
- Set a minimum. Decide the lowest balance you’re comfortable with, such as two weeks of fixed costs. Flag any week that dips below it.
- Update it weekly. Replace the estimate with what really happened, and add a new week at the end so you always see thirteen weeks ahead.
Example: a food truck opening for spring
This truck starts the quarter with $6,000 and has set a $2,500 minimum. Sales build as the weather warms, but spring bills arrive early.
| Week | Starting cash | Cash in | Cash out | Ending cash | Notes |
|---|---|---|---|---|---|
| 1 | $6,000 | $1,200 | $2,500 | $4,700 | Permit renewals, commissary |
| 2 | $4,700 | $1,500 | $1,800 | $4,400 | |
| 3 | $4,400 | $1,800 | $4,200 | $2,000 | Stock up, generator repair |
| 4 | $2,000 | $2,400 | $2,100 | $2,300 | |
| 5 | $2,300 | $3,000 | $3,400 | $1,900 | Summer festival deposit |
| 6 | $1,900 | $3,200 | $2,300 | $2,800 | |
| 7 | $2,800 | $3,600 | $2,600 | $3,800 | |
| 8 | $3,800 | $4,000 | $4,900 | $2,900 | Quarterly insurance, big stock order |
| 9 | $2,900 | $4,200 | $2,800 | $4,300 | |
| 10 | $4,300 | $4,500 | $3,000 | $5,800 | |
| 11 | $5,800 | $4,800 | $3,100 | $7,500 | |
| 12 | $7,500 | $5,000 | $3,200 | $9,300 | |
| 13 | $9,300 | $5,200 | $3,300 | $11,200 |
Over the quarter the truck ends up $5,200 ahead. But weeks 3, 4 and 5 fall below the $2,500 minimum, and week 5 hits $1,900. One slow rainy weekend there and a payroll could bounce.
Seeing it now gives the owner options:
- Move the generator repair to week 6, or ask the shop to split the bill.
- Buy the week 3 stock in two smaller orders.
- Ask the festival whether the deposit can be paid later or in parts.
- Hold off on owner draws until week 9.
None of these change profit. They just move cash to the weeks it’s needed.
Cash flow tips for markets, food trucks and seasonal shops
- Build a reserve in the busy months. Move a fixed share of each strong week’s sales into a separate account for the off-season. Decide the amount when cash is plentiful, not when it’s tight.
- Keep sales tax separate. Put it aside as you collect it, so the filing doesn’t come out of next month’s stock money.
- Buy stock closer to when it sells. Use last season’s best sellers and sell-through to order in smaller rounds instead of one huge opening order.
- Clear slow stock before the season ends. Items still on the shelf in the off-season are cash you can’t use.
- Sell in the off-season. Gift cards before the holidays, winter pop-ups, private catering or preorders for spring can bring cash into slow months.
- Know your payout timing. Check how many days your card processor takes to deposit, and plan around weekends and holidays.
- Line up credit before you need it. A line of credit or supplier terms are easier to arrange when the numbers look good than in the middle of a crunch.
- Pay yourself on a schedule. A steady draw you can plan for beats large, irregular withdrawals in good weeks.
Operating, investing and financing cash flow
If an accountant or lender hands you a cash flow statement, it will split cash into three groups. Operating cash flow is money from day-to-day selling and running the business. Investing cash flow covers buying or selling equipment and other long-term assets. Financing cash flow is loans taken or repaid and money the owner puts in or takes out. The 13-week forecast above mixes all three, which is fine for planning. The statement is useful for seeing which kind of cash drove the change.
Want to know how revenue and profit relate to each other before you get to cash? See revenue vs profit and gross vs net.
Using SleepingFire numbers in your forecast
SleepingFire doesn’t produce cash flow statements or forecasts; it’s point-of-sale and inventory software. What it gives you are the inputs. Filter sales reports to the same weeks last year to estimate cash in, and the daily Z-report to see how each day split between cash and card. Use peak hours and best sellers to plan staffing and stock, the inventory valuation at cost to see how much cash is sitting on your shelves, and the sales tax summary to know what to set aside. See the sales reports.