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A signed contract does not pay your rent.
I say that because every Q4 I watch smart coaches plan the quarter on booked revenue, then spend October through December discovering that cash and contracts are two different animals. The sale was real. The money arrives in installments, some of them late, some of them never, with a refund request or two in between. Meanwhile ad costs, holiday weeks and year-end bills all land at once.
In my own business, the discipline that has mattered most is boring: plan on what you collect. This is general business education, not financial or tax advice, so check specifics with your accountant.
Why does Q4 surprise coaches who looked fine in September?
Because three pressures arrive at the same time, and each one hits cash first.
Pressure one: ads
AdImpact now projects a record $10.7 billion in political ad spending for the 2024 cycle, up 19% from 2020, across all media.4 I cannot tell you how much of that lands in the auctions you buy in. I can tell you the direction: more bidders and bigger budgets make the same attention cost more, and small advertisers feel it first (the same numbers anchor my mid-2024 read on costs).
Pressure two: attendance
Holiday weeks disrupt calendars. Calls get rescheduled, buyers push decisions to January and prospects who said yes in October are suddenly "waiting until after the holidays." That is an observation from my own ad accounts, not a statistic, so track your own show rate and close rate week by week. I wrote about engineering booked-to-showed for exactly this reason.
Pressure three: the year-end ledger
Taxes, annual software renewals, bonuses to contractors and your own draws all show up in the same stretch. If you plan on booked revenue, you will think you can pay them. The bank will disagree.
What is the difference between booked and collected revenue?
Booked revenue is the total value of agreements. Collected revenue is what actually reached your account.
| Planning on booked revenue | Planning on collected cash |
|---|---|
| Counts the full contract value when signed | Counts each installment when it lands |
| Assumes every payment succeeds | Applies a collection rate to every plan |
| Ignores refunds until they happen | Reserves an allowance for refunds |
| Treats a no-show as a delay | Treats a no-show as revenue that may never arrive |
| Reports a great month and a thin bank account | Reports a modest month and a bank account that matches |
Why the gap exists
A $6,000 package sold as 6 monthly payments has one-sixth of its cash in your account on day one, and the rest depends on cards that keep working, clients that keep their commitment and a service that keeps its promise. I use that as arithmetic illustration only. The principle applies to any size.
Patrick Bet-David gave salespeople a budgeting rule in a video posted on September 18, 2024 that fits irregular coaching income just as well:
Always treat your income as your lowest monthly income you make in sales commission in the last 6 months.
He says it for commission, and I would apply it to collected revenue. Plan on the month you can count on, then treat anything above it as surplus.
How do you build a 13-week cash view?
One page, one row per week, updated every Monday.
- Start with the real balance. Opening cash for week one is whatever the bank says today.
- List the scheduled collections. For every payment plan, enter each installment in the week it is due.
- Apply a collection rate. Multiply each week's scheduled collections by the share that actually arrives on time in your history.
- Add new sales cautiously. Forecast only the first payment of new sales, and only at the close rate you have actually achieved.
- List every outflow. Ad spend, software, contractors, taxes, your own pay and a refund allowance.
- Compute closing cash. Opening plus in, minus out, carried to the next week.
- Mark the low points. Highlight any week where cash dips below your safety floor and decide now what you will do.
Keep it ugly and weekly
A cash view does not need software. A spreadsheet that you open every Monday beats a beautiful model that you update quarterly. The value comes from the habit, not the format.
How do you model payment plans, failures and refunds?
With your own history, and a haircut where you have none.
Collection rate
For each type of plan, look back and ask: of the installments due, what share arrived on time, what share arrived late and what share never did? Use those numbers. If you have no history, start low and raise the rate when the data earns it.
Refund allowance
Refund requests are a cost of doing business. Set aside a percentage of new sales based on your history. If you have not tracked refunds before, begin tracking now. The first quarter of data is worth more than any benchmark I could give you.
Slippage
Slippage is the delay between when you expected cash and when it showed up. A sale that closes on December 28 may not produce cash until January. Plan for it by pushing expected cash dates out, not by hoping.
What do interest rates mean for your plan?
A little, if you borrow.
On September 18, the Federal Reserve's FOMC lowered the target range for the federal funds rate by one-half of a percentage point, to 4-3/4 to 5 percent, noting further progress toward its 2 percent inflation objective and that job gains had slowed.1 If you use a line of credit or business credit card to smooth cash, borrowing costs may ease over time, but the pace is not certain, and credit is a bridge, not a plan. Do not base your Q4 on it.
How should you plan Q4 in stages?
With checkpoints, not one big forecast.
Rita McGrath and Ian MacMillan argued in Harvard Business Review that managers entering unfamiliar territory can prevent or contain many failures by using the right planning and control tools.3 I read that as permission to plan in stages. Q4 is a perfect example: nobody knows what ad costs or buyer behavior will do.
Three checkpoints
- October 31. Compare actual collections to the plan. If ad costs are up, decide whether to trim spend or tighten targeting.
- November 30. Review show rate, close rate and refund rate. Decide on holiday promotions with your margin in view.
- December 15. Confirm cash for year-end obligations and the first weeks of January.
Revenue is an opinion. Cash is a fact. Run your quarter on the facts.
You are in good company if all of this feels like extra work. The SBA's Office of Advocacy counts 34,752,434 small businesses in the United States, 99.9% of all businesses.2 Most of them are planning without a finance department. A one-page cash view puts you ahead of many, and it is the cash-collected half of the revenue system. It also gives you something rarer than a good quarter: a clear picture of what is left over. Once it is steady, point some of that attention at the long game, and the Investing and Retirement section is a good place to begin.
When you want your sales process built into something you can plan around, reach out.
Keep building.Ekai
Questions people ask
What is the difference between booked and collected revenue?
Booked, or contracted, revenue is the value of agreements signed. Collected revenue is the cash that actually arrived. With payment plans, failed cards and refunds, collected trails booked, sometimes by months.
What is a 13-week cash forecast?
It is a week-by-week projection of cash in and cash out for the next quarter, starting from your actual bank balance. It shows when you will be short, long, or exposed, before it happens.
How do I model payment plan slippage?
Use your own history. For each plan, apply a collection rate based on how often installments actually arrive on time, and apply a refund allowance. If you have no history, start conservatively and update weekly.
Why does Q4 stress coaching cash flow?
Several pressures arrive together: advertising competition rises, holiday weeks tend to disrupt calls and payments, and year-end spending and taxes pull on cash. A record political ad cycle is projected for 2024, which adds pressure in the auctions.
Sources
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