Cash Flow

Cash Flow

Module 7: Cash Flow

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🎯 Our goal in this module is to introduce you to Cash Flow and help you start using it in your business.

Cash Flow is a great place to start.

You may be surprised to learn that 82% of businesses in the U.S. fail due to cash flow problems.

According to SCORE (the U.S.’s largest network of volunteer, expert business mentors and resource partner to the Small Business Administration), the number one reason that small businesses fail is cash flow problems.

So, you can see that understanding and properly managing Cash Flow will be critical to your success in business.

Good News: Cash flow management is an easy skill to learn and master—just make sure that it is a priority for you in your business.

You might want to open our Financial Projections template for reference as we go through this discussion. Look for “Cash Flow Statement” in each of the sheets labeled “Year 1”, “Year 2”, and “Years 3-5”.

Basically, Cash Flow accounts for all the money “flowing” into your business and all the money “flowing” out of your business—this can be by debit or credit card, online payment services, check, or even hard “cash”. 

The goal is to have all the money you need, when you need it, during any period of time (day/month/year) plus more money left over in your bank account at the end of each period.

Note: It is common practice in business to simply refer to all the money flowing into and out of your business as “cash”, whether or not it’s physical currency.

Here’s a short version of a Cash Flow Statement for a month:

Beginning Cash Balance
+ Cash In
- Cash Out
Ending Cash Balance

Beginning Cash Balance (how much cash you start with at the beginning of the month)

Plus Cash In (cash coming into your business from revenues, loans, investments, and any other sources during the month)

Minus Cash Out (cash flowing out of your business to pay sales costs, rent and utilities, payroll, all other expenses for operating your business, interest on loans, taxes, and anything else during the month)

Equals Ending Cash Balance (how much cash you have left over at the end of the month)

Your Cash Flow projections can help you determine how much money you will need to launch your business and to pay your bills until your company will be in a position to pay its own expenses from profits.

Finding How Much Money You’ll Need to Launch

For a startup business, if you plug-in “0” (zero) as the amount for your Beginning Cash Balance, and then project all the money coming into your company and all the money going out of your company for the first 3-5 years, you will have some periods of negative Ending Cash Balance.

The largest negative Ending Cash Balance for any period (month/year) will be the minimum amount of money that you will need to launch your business and pay the bills until your business is profitable—which we’re hoping will happen at some point during the first five years of operating. 😅

Once you determine how much cash you’ll need to launch your business and cover expenses until you are profitable, you can plug-in that amount as your Beginning Cash Balance for your Cash Flow projections.

Cash In is primarily the revenue that you will receive from selling your product/service, but you will also include cash from any source (bank loans, equity from investors, tax refunds, etc.)

Cash Out is all the money leaving your business. This will include:

  • Monthly expenses required to create and sell your product/service and operate your business
  • Money you use to purchase equipment, furnishings, computers, and any other assets
  • Interest on loans and taxes on your “profits”
  • And more...

Most businesses focus on profits—very important, but not enough

Way too many businesses go bankrupt or fail even though they are profitable. The real culprit here (and arch enemy of startups and small businesses) is poor cash management.

We’ll get you started on the right track, and you’ll see how easy it will be to forecast and manage the cash flow of your business. 

This alone will give you an incredible advantage in your business career. 

All you have to do is keep Cash Flow Management as your top priority. It’s easy to learn and mandatory to do.

You should be thinking about cash flow every day that you are running your business—you should be dreaming about Cash Flow. 😉

⚡Action Step

Fill out your Cash Flow Statement in our Financial Projections template.

We are currently creating additional instructions and tutorial videos demonstrating exactly how to do this.  Stay on the lookout.

🗂️ Resources

Click each card below to learn more.
Business Plan Core Template
Business PlanBizActually
A no-frills Business Plan template in Google Sheets. (Created by our Team)
Financial Projections
FinancialsCash FlowProfit & LossBalance SheetBreak-EvenBizActually
A Google Sheet to organize and calculate your financial projections. (Created by our Team)

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