How to predict and prevent cash flow gaps before peak season 

Businesses can predict potential cash flow gaps before peak season by forecasting when money is expected to come in and when expenses need to be paid. Comparing these amounts can help identify possible shortfalls before busy trading periods begin. 

A cash flow gap can happen when you need to pay for things like stock, wages and marketing before enough money from sales or customer payments comes in.  

In this guide, we explain what causes seasonal cash flow gaps, how to identify early warning signs and practical ways to prepare your business for peak trading periods. 

What is cash flow? 

Cash flow is the money coming into and going out of your business over a period of time. 

Money comes in through things like sales and customer payments. It goes out when you pay suppliers, wages, rent, tax, loan repayments and other business expenses. 

Positive cash flow means more money came into the business than went out over a period. Negative cash flow means more money went out than came in. 

What is a cash flow gap? 

A cash flow gap is when your business needs to make payments before enough money has come in to cover them. 

For example, you may need to pay for extra stock before peak season but won’t receive the money from selling that stock until later. The time between paying for the stock and receiving money from sales can create a temporary cash shortfall. 

The size and duration of a cash flow gap depend on when money enters and leaves the business. 

Why cash flow gaps happen before peak season 

Cash flow gaps can occur before peak season because businesses often need to increase spending before the extra money from peak-season sales comes in. 

Depending on your business, common causes can include: 

• Stock purchases: Suppliers often want payment weeks or months before peak trading starts, while your own customers won’t be paying you until the season is actually underway. 
• Staffing costs: Hiring and training seasonal or casual staff ahead of time means higher payroll costs kick in before the sales actually increase to cover these costs 
• Fixed and scheduled business expenses: Rent, insurance, tax and scheduled loan repayments may continue while other pre-season expenses are increasing. 
• Customer payment timing: If a large chunk of your revenue comes from invoiced B2B sales, payment terms of 30, 60, or even 90 days can leave a significant gap between doing the work and actually being paid for it. 
• Marketing costs: Getting the word out ahead of peak season means outgoings increase before the campaigns start driving sales. 

A cash flow gap is more likely when several expenses need to be paid around the same time, before enough money has come in to cover them. 

How to predict a cash flow gap before it hits 

A cash flow forecast can help you estimate how much money will come into and leave your business over the weeks or months ahead. 

A simple way to calculate your expected cash position is: 

Opening cash balance + expected incoming cash − expected outgoing cash = forecast closing cash balance 

A declining or negative forecast closing balance can indicate when a cash flow shortfall may occur and approximately how large it could be. 

Example: Calculating a potential cash flow gap 

Consider a small retail business preparing for the Christmas trading period. 

The business expects to receive $20,000 in customer payments but needs to pay $40,000 in upcoming expenses, including stock, wages and rent. 

Cash flow forecast	Amount
Opening cash balance	$15,000
Expected customer payments	+$20,000
Expected business expenses	−$40,000
Forecast closing cash balance	−$5,000

Illustrative example only. Actual cash flow will depend on individual business circumstances. 

In this example, the business has a forecast cash shortfall of $5,000 for the period, assuming no additional incoming funds or financing. 

Identifying this potential gap early gives the business more time to review upcoming expenses, customer payment arrangements and other available options. 

Review previous peak seasons 

Past sales and expenses can help you understand how your cash flow has changed around peak season before. 

Look at when your biggest expenses were paid and when money from sales or customer payments actually came in. Then consider what’s different this year, such as changes to stock costs, wages, staffing levels or expected sales. 

Past results won’t tell you exactly what will happen this year, but they can help you build a more informed forecast. 

Build a cash flow forecast 

A sales forecast estimates how much you expect to sell. A cash flow forecast focuses on when you expect to actually receive and spend money. 

For each week or month, estimate: 

• how much cash you expect to start with; 
• money expected from sales and customer payments; 
• upcoming costs such as stock, wages, rent, marketing, tax and loan repayments; and 
• how much cash you expect to have left. 

Using the dates you expect to receive and pay money can give you a clearer picture of whether you may have enough cash available when bills fall due. 

Track your accounts receivable closely in the lead-up 

If clients are already slow to pay in a quiet month, that pattern rarely improves under the pressure of peak season. Don’t assume an overdue invoice will suddenly be paid on the original date when you’re updating your cash flow forecast. Use a realistic, expected payment date so you have a clearer view of how much money may actually be available. 

Watch your break-even point shift 

As costs increase ahead of peak season, your break-even point moves too. Knowing exactly how much revenue you need each week to stay afloat helps you catch a widening gap before it becomes a serious issue.  

Update the forecast regularly 

Your cash flow forecast will become more useful as you replace estimates with real figures. 

Update it as sales come in, bills are paid and customer payment dates change. This can help you see whether a potential shortfall is getting bigger, smaller or happening at a different time than expected. 

What are the warning signs of a cash flow problem? 

Common signs of cash flow pressure can include having less cash available than expected, more overdue customer invoices and difficulty paying bills when they’re due. 

Other things to watch for include: 

• less money coming in than you forecast; 
• delaying payments to suppliers; 
• difficulty paying loans, tax or other bills on time; 
• using up your cash reserves faster than expected; and 
• regularly using borrowed or personal money to cover everyday business expenses. 

These signs don’t necessarily mean your business is in financial difficulty, but they may be a reason to take a closer look at your cash position. 

How can businesses prevent cash flow gaps before peak season? 

Businesses can reduce the risk of a cash flow gap by managing the timing of incoming and outgoing payments, planning seasonal expenses and maintaining cash buffers where possible. 

Some practical steps include: 

• Negotiate supplier payment terms: Many suppliers are open to extending payment terms, especially for repeat customers, if you ask before the order rather than after it’s overdue. 
• Plan stock purchases: Rather than one large order paid up front, smaller, phased orders can spread the outgoing cost closer to when the stock is actually needed. 
• Invoice promptly: Sending reminders before a payment is even due – rather than after it’s already overdue can cut meaningful time off your average payment cycle. 
• Review customer payment timing: where appropriate and agreed, deposits, staged payments or different billing schedules may help align incoming cash with expenses. 
• Maintain a cash buffer specifically for this period: Setting aside a portion of quieter-month profit specifically ringfenced for peak season lead-up costs takes pressure off. 

What if your cash flow forecast shows a shortfall? 

If your forecast shows that you may not have enough cash to cover upcoming expenses, looking at your options early can give you more time to prepare. 

You might start by checking when customer payments are due, reviewing expenses that can be moved or reduced, speaking with suppliers about payment terms and looking at any cash reserves available. 

If there is still a gap, you may also want to consider whether a business finance option could help cover planned expenses. 

How could the Tyro Flexi Loan help before peak season? 

If your cash flow forecast shows a possible shortfall before peak season, the Tyro Flexi Loan is one funding option eligible Tyro customers could consider for planned business expenses. 

The Tyro Flexi Loan is an unsecured business loan of up to $400,000 with a fixed loan fee calculated upfront rather than an interest rate ¹. You nominate a percentage of your daily takings to go towards repayments, so repayment amounts can rise and fall with your sales. 

For a seasonal business, this means repayments may be lower when sales are lower and increase as trading picks up. 

Getting ahead of peak-season cash flow 

Preparing for peak season starts with understanding when money is likely to come into your business and when your biggest expenses need to be paid. 

A regularly updated cash flow forecast can help you spot a possible shortfall before it happens. If you do find a gap, looking at customer payments, supplier terms, upcoming expenses and cash reserves early gives you more time to consider your options. 

If a gap remains, business finance may be one option to consider based on your business’s needs and ability to make repayments ².