Simple Cash Flow Tool

What is the simple cash flow tool?

We’ve all looked at our bank balance when it’s healthy and started having visions of new clothes, holidays and nights out etc. However, as business owners, we also know that we have business (and personal) costs that must be paid for before any of those enticing dollars can find their way into our pockets. This cash flow tool is a reality check for your business, that tells you exactly how much you have to spend, as opposed to how much you think you have to spend!

How does the tool work?

This tool asks you to review a prior period such as last week, fortnight, month, quarter or year. For the purposes of the tool, we call these periods your “focus periods”

Our tool is split into two sections. The first section takes your opening bank balance at the start of your focus period, adds any income from sales, deducts your operating costs and deducts the required minimum bank balance (that amount you know you need to leave in the bank for running costs). The result provided is the balance available for spending or saving as at the end of the focus period i.e. how much you have at your disposal TODAY. The second section in the spreadsheet takes today’s available balance as above, then adds back any future income and deducts future bill or liability payments. The final result is called your “true cash flow figure“, and is a more accurate representation of your financial position.

Don’t get me wrong, knowing your available spending balance as of today is still necessary, however, in order to understand your true cash position, it is important to include all future spending/income. Doing this will ensure that you don’t inadvertently spend dollars that really should be saved for the long term.

Now that you can see your “true cash flow figure” you will be able to make a more informed decision about how much is really available for spending (or saving) today. Of course, if your figure is low or even negative, then perhaps you need to review your situation and work out why this is happening. Whatever the outcome, this tool will provide you with a snapshot of your overall financial position. One important aspect to note is that for this tool to work properly, your accounts need to be up to date. As a minimum, ensure that your bank accounts are reconciled up to the end of your focus period prior to using this tool.

Getting started with the cash flow tool

Open the spreadsheet which is shared below. There are 3 tabs in the spreadsheet. The first tab of the spreadsheet is an example of how the tool works and includes notes and instructions. The second tab is a single-period cash flow to look at one focus period only e.g. one week, one month etc. The third tab is a multi-period tool that allows you to look at several periods at once. Follow the instructions provided in the first tab and then enter the figures as required into either the single or multi-period tab.

I suggest running this cash flow tool on a regular basis to assist you in controlling and understanding your business finances. If you need assistance to use this tool or would like us to prepare it for you, please get in touch to discuss.

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