Managing Cash Flow as a Consultant: Avoid the Feast or Famine Trap
As a consultant, you might know the thrill of landing a big contract—and the anxiety that comes when it wraps up with nothing on the horizon. This “feast or famine” cycle is one of the most common challenges consultants face. Thankfully, with some simple financial habits and smart systems, you can smooth out your cash flow and gain peace of mind.
1. Know Your Monthly Baseline
Start by understanding your minimum monthly expenses—both business and personal. This number is your baseline, the amount you need coming in to keep things stable. Once you know this, it becomes easier to recognize what’s enough (and when you're headed for trouble).
2. Create a Rolling Cash Flow Forecast
A rolling forecast shows what money is coming in and going out over the next 6–12 weeks. You don’t need to get fancy—just a spreadsheet or tool like QuickBooks can help you:
Anticipate slow periods
Spot potential shortfalls early
Make informed decisions about expenses or marketing pushes
Update it weekly or biweekly to stay ahead.
3. Break Down Project Payments
Rather than billing at project completion, structure payments in phases. For example:
50% up front
25% at midpoint
25% at delivery
This ensures steady cash coming in—even when a project spans multiple months.
4. Build a Cash Cushion
Aim to set aside at least 1–2 months of operating expenses. Start small—even saving 5% of each payment can add up quickly. This buffer gives you breathing room between projects.
5. Invoice Promptly and Follow Up
Late invoices delay your cash flow. Make it a habit to:
Send invoices immediately when work is completed
Use invoice automation tools
Follow up consistently on overdue payments
QuickBooks can send reminders automatically so you don’t have to chase payments manually.
6. Diversify Your Income Stream
If all your income comes from one large client, you’re vulnerable. Consider:
Retainer clients for stability
Smaller, repeatable offerings (audits, templates, strategy sessions)
Passive income through digital products or courses
Even small additions can help smooth out your income curve.
7. Work With a Bookkeeper Who Understands Consulting
A bookkeeper who specializes in consulting businesses (like me!) can help you set up systems to monitor cash flow, track trends, and plan for lean seasons. You don’t have to go it alone.
Ready to escape the feast or famine cycle?
Let’s talk about how better financial systems can bring more calm, consistency, and clarity to your business.
Book a free discovery call today.