Anticipate Cash using the Niche Publisher’s 5 minute Cash Flow Calculator
Typically, NichePublisher.biz focuses on growing revenues. However, even growing, thriving titles with healthy margins can run out of cash. These shortages cause stress and distract leadership’s strategic focus.
It’s easy to spend too much energy finding cash, rather than anticipating it. NichePublisher.biz designed the Niche Publisher Cashflow Calculator to help our members anticipate the inevitable shortages most media experience.
Check out the calculator, then use these 9 Tricks Publishers use to even out cash flow.
Why Cashflow Surprises Happen to Profitable Companies
The classic example of a cash shortage occurs, ironically, when a company is growing. The sales rep books a $20,000 campaign for June. The advertiser pays in August. The sales rep, printer, and other suppliers need to be paid in July.
Congratulations. The company just sold a profitable campaign and created a cash flow shortage. Book ten more such campaigns, and making payroll starts to look like a problem.
The accountant slow-pays the bills. There’s a trip to the bank. The owners stop paying themselves. No one is rehired when someone leaves. Hours are cut. And on it goes.
Ad agencies are often a culprit, dragging payment out 120 days or more while they collect from their clients. In fact, the amount of business going through ad agencies is often a predictor of a cash-strapped publisher. But there are other reasons, too.
Seasonality
Many B2C titles can rake in 40% of sales in Q4, so cash flow 30 to 60 days out in Q1, when sales could be only 15% of annual revenues, looks great. But as sales climb back to normal in Q2, the cash generated from Q1 sales has to cover immediate costs – such as payroll, commissions, the printer, and/or programmatic buys.
Some companies also get most of their money in one month – say a Best of, or an event – and then need to spend it appropriately so it lasts for the rest of the year. This is a great problem to have, but also requires cash management skills.
And then there are the inevitable financial crises – a pandemic, war, recession, or even an algorithmic change – that throw off “what was supposed to happen.”
Start by simply calculating 12 months ahead. You’ll need a few numbers that the accountant already has.
Using the Cashflow Projection Tool: Tip 1 keep it simple
The Publisher Cashflow Calculator to answer when company will run short of cash and by how much? Unlike a full accounting system, the calculator is intentionally designed to keep things simple.
2. Ask the account for this list
Prep these numbers from your accountant. Then plug them in to “see” what’s going on cashwise. Taken one by one, here’s the fastest way to get what you need.
- Current receivables and payables balances at current, 30, 60, 90, etc. , from the accountant to set the starting point. These numbers start off the ledger.
- Project sales monthly for one year, plus how quickly each major category turns into cash. To project sales, just use the prior year’s monthly sales plus or minus the percentage by which recent month/s were ahead or behind. Don’t overthink it. Then estimate “days to pay” for each major revenue type in which days to pay are different. For example:
- Events collect 50% immediately.
- Print advertising collects in 60–90 days.
- Digital advertising takes 30–45 days.
- Memberships collected immediately.
- Agency business is 120 days out.
3. Fixed and variable costs
• Fixed costs just mean what the constant overhead is, no matter how much you sell or don’t sell. Typically, it’s a monthly figure that never changes, which includes rent, utilities, salaries, etc. Identify these categories and give them to accounting.
• Variable costs such as commissions and printing shift depending on how much you sell and can often be expressed as a percentage of revenue. A rolling spreadsheet is the best way to know exactly, but your accountant can spot-check these for a few months fairly easily.
• One-time costs are high costs that happen once, or once a year, such as an event or moving an office.
4. Estimated payment window for each of these types of cost
Plug estimates into the calculator.
Tip 3: Look at AR as a percentage of monthly revenues
Another number the calculator will give you is AR/monthly revenues. Let’s say:
Accounts Receivable = $120,000
Monthly Revenue = $40,000
120,000 ÷ 40,000 = 3.0
You have three months of revenue tied up in receivables.
Think about that for a moment. You are essentially financing three months of customer operations, and the faster the company grows, the more cash-strapped it becomes.
The question isn’t just: “How much revenue do we have?” It’s: How quickly does revenue become cash?”
That’s a very different conversation.
And it’s usually where the real answers live.
Give the Publisher Cashflow Calculator a try here.
Then look at the Nine Tricks Publishers use to Even out Cashflow.
