How to plan for slow months using your own invoice history

Some months are quiet. If you only notice when it happens, you are already paying for it from your own pocket. Your invoice history can tell you whether you have a pattern, and how much cash to put away to get through it. This post shows how to check, with a worked example you can repeat with your own numbers.

Look for a pattern in your own data

You do not need a market report. Your own invoices already show whether certain months are slow for you.

Open your accounting or invoicing records and list revenue for each of the last twelve months. If you have two or three years, use them, because a single year can mislead. A slow month caused by one lost client is not a pattern. A slow month that repeats each year is.

Use the month work was invoiced, and note the date the money arrived if it differs. Cash timing matters here, and cash flow can look quite different from revenue.

A worked example with made-up figures

These numbers are hypothetical. Say a small agency invoiced the following amounts, in thousands of dollars:

• January 14, February 12, March 15, April 16
• May 15, June 13, July 9, August 8
• September 15, October 17, November 16, December 10

Add them up: 14 + 12 + 15 + 16 = 57. Then 15 + 13 + 9 + 8 = 45. Then 15 + 17 + 16 + 10 = 58. The year total is 57 + 45 + 58 = 160, or $160,000.

The monthly average is 160,000 / 12 = about $13,333.

Compare each month with your fixed costs

The average is useful, but cash is decided by what you must pay each month. List your fixed costs: salaries, rent, software and anything you pay whether or not work comes in.

Say fixed costs are $11,000 a month. Now check which months fall below that line:

• July: 9,000 is $2,000 short
• August: 8,000 is $3,000 short
• December: 10,000 is $1,000 short

The other nine months are above $11,000. The total shortfall is 2,000 + 3,000 + 1,000 = $6,000.

That $6,000 is the amount you need to have saved to cover those three months without borrowing or skipping your own pay. If you compare with the average instead of the fixed costs, you get a different and larger gap of about $13,000, which would overstate what you need.

Turn the shortfall into a monthly set-aside

Spread the amount across the months that are not slow. Nine months remain, so 6,000 / 9 = about $667 a month.

Move that amount into a separate account each month when the invoice is paid. This turns a stressful event into a routine transfer. It also fits alongside the broader reserve described in how much cash reserve should an agency keep.

If your pattern is stable, put the transfer on a calendar. If it changes year to year, review the numbers each quarter.

Check what could distort the pattern

Before you rely on the table, ask three questions about each slow month:

• Was there a one-off cause? A large project that ended, a client who left, or a holiday that fell in a different month can all create a dip that will not repeat.
• Was payment late? A month can look slow only because a big invoice was paid in the next one. Compare invoiced amounts with cash received.
• Did your prices or team change? If you raised rates or hired someone, older months are not a fair comparison with newer ones.

Remove or note anything that explains a dip. What remains is the pattern worth planning for.

Fill the gap with work, not only savings

Savings cover a gap. Work can shrink it. Once you know which months are slow, you have time to act early.

• Sell ahead. Start conversations about projects for the slow months eight to twelve weeks earlier. Check workload for the next eight weeks so you can see the dip coming.
• Offer retainers. Recurring work smooths the line. Retainer and project revenue discusses the balance.
• Contact past leads. Quiet weeks are a good time for reactivating old leads.
• Schedule internal work. Use slow weeks for your own site, case studies or process documents, which are hard to fit into busy weeks.
• Plan time off. If a month is predictably quiet, take your own holiday then.

Test the plan with a forecast

A reserve answers one question: can you survive the slow months? A forecast answers another: when will cash run short? Build a 13-week cash flow forecast before a slow period starts, and update it every week.

Seeing a low point eight weeks ahead gives you time to chase invoices, delay a purchase or sell more. Seeing it the week before gives you very few options.

Keep the history up to date

Each year, add the new twelve months to your table and check whether the pattern has moved. A slow month that is now busy is a sign that your sales or mix of clients has changed, and your set-aside can change with it. HireOrSell has income and expense tracking with financial reports, and you can check the pricing page for the plans that include them. A spreadsheet works too.

This post is general information, not financial advice.

Next step

List your last twelve months of revenue and your fixed monthly costs. Mark every month below the fixed-cost line and add up the shortfall. Divide it by the number of other months to get your monthly set-aside, and set up that transfer this week.