6 Easy Ways to Project Your Cash Flow Statement

cash flow statement

There are ups and downs to starting a small business, but projecting your cash flow statement can be daunting.

Cash flow problems are one of the leading causes of business failure. The good news is that it doesn’t have to be such a nerve-wracking chore. By building accurate forecasts, you can prepare for money shortages and make smart moves when you’re flush with cash.

Positive cash flow requires dedication and hard work, so here are some tips and tricks to get your cash flow statement under control.

6 Ways to Project Your Cash Flow Statement

  1. Sales Forecasts

    Cash flow includes accounts receivable, accounts payable, inventory, capital expenditures, and debt service. By doing a cash flow analysis, you will ensure you have enough money each month to cover your liabilities.

    Businesses have busy and slow seasons, and you need to know when yours ebbs and flows. Create a sales forecast that projects several months, if not a year, into the future. If you’ve been in business a year or more, you can base your sales predictions on existing data. Are you a new business owner? Project sales based on competitive research.

  2. Tracking

    Putting cash flow projections in writing will give you a better perspective on the overall health of your business. If you want to go low-tech, the Small Business Administration has free cash flow worksheets. Most consultants, however, recommend tracking your money with a software package like QuickBooks, which is tailored to small- or mid-sized businesses and will help you produce a cash flow statement.

  3. Know When You Get Paid

    Do customers pay you at point of sale or do you invoice? Knowing when you get paid is critical to your cash flow statement. Avoid being too optimistic about your clients’ payment habits. Invoices can take at least 30 days to pay and many clients are often late with those funds.

    Need to smooth out your cash flow? Set up an account with Fundbox and get the cash to meet your immediate needs, whether it be covering payroll or an urgent equipment repair. Fundbox advances the full value of your invoice and doesn’t interfere with customer relationships. With Fundbox, funds are available in your bank account the next day and can cover expenses while you wait on invoices to come in.

  4. Overlooked Recurring Expenses

    Some expenses sneak up on you. You may have accounted for two payrolls every month, but did you think about the months that have three pay periods? Pinpoint the months with a third pay period and include them in your projections.

    Pay taxes quarterly? That’s a major outgoing expense you need to account for. Does your business buy extra inventory during the summer months or around the holidays? Include that in your forecasts, as well.

  5. Expect Surprises

    Just like your personal budget, your company must account for unexpected costs. Whether it’s equipment repair, a price hike in raw materials, or a rent increase on your storefront, you need to be prepared. Small business consultants recommend you set aside at least 10 percent of your monthly revenue for minor emergencies. If nothing crops up, you have extra cash to put back into the company.

  6. Keep on Top of It

    As a business owner, you should review your cash flow on a weekly basis. Keep abreast of your incoming revenue and outgoing payments to make more accurate predictions in the future.

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Tags: Financing