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Taking Charge of Your Cash Flow Calendar

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Small businesses will attest: cash flow is king. From payroll to printing paper, cash keeps your business running. With the fast pace of business, you need financial literacy and close cash flow management or you may find yourself perilously over-budget. The key to success is planning in advance—with the help of an excellent cash flow calendar. To help you become the maestro of cash flow management, here is a guide to managing your cash flow for the short and long run.

Taking Charge of Your Cash Flow Calendar

1) Day-by-day

Every day of business can affect your cash flow, so you want to monitor the daily comings and goings. Start with figuring your cash inflows. Cash inflows typically come from sales and accounts receivables. However, for the time being, it may be best to set aside any one-time, large-scale revenue sources, such as the sale of capital. With the day-to-day calendar, you are trying to gain a picture of your daily spending and saving trends.

Once you have calculated your revenue for the day, you will have to figure in your expenses. Look at all of your expenses as they cost that day, including the day rate for any salaries or commissions, rent, advertising, shipping costs, loan payments, etc. In short, compute the cost of running your business for that single day. Subtract your expenses from your revenue and your closing balance will show you the state of your cash flow on a daily basis.

Follow this trend for every day of the week, and keep in mind that cash flow will probably look different on the weekends. Once you have your closing balance, you can understand which days are better than others, and you can combine the data to project your cash flow for the entire week.

2) Week-by-week

Mapping your cash flow by the week is very similar to daily financial management. In fact, if you find day-by-day management too suffocating (an excellent accounting software could ease the pain), you may try a weekly projection instead. The basic premise is the same: balance out your cash inflows with your cash outflows. This means for the entire week, calculating the amount you have earned from sales and revenue, then subtracting the total amount you spent. These numbers will help you see the level at which your business needs to run in order to keep a healthy cash flow.

3) Month-by-month

While day-by-day or week-by-week projections help you see the business’ daily success, a monthly cash flow calendar can help with long-term planning. For each month, start by figuring out your beginning cash balance. This might include funds from your original startup loan. Once again, calculate your cash inflows from sales and accounts receivables. You can also include other forms of income, such as the sale of capital, if you plan to direct those funds toward working capital.

Your cash outflows will look a little different from short-term projections, as you might have made large purchases that were not factored into daily or weekly spending. Calculate your monthly cash outflows to include investments made that month, such as the purchase of fixed assets and inventory purchases. Add your operating expenses, including salaries, fixed business expenses like rent or vehicle payments and taxes. You should also factor in any payments for loans, business lines of credit, dividends, interest and other financing activities.

The sum of all these expenditures is your cash outflow. Subtract this number from your cash inflows, and you will find your ending cash flow balance. If you have a business line of credit, you can also consider the available balance as part of your projection, but this will require a separate section, as you will have to repay those funds.

Combining these monthly cash flow calendars can help you project your cash flow totals for the entire year. Whether you are dealing in years, months, weeks or days, staying on top of your cash flow means staying on top of your small business.

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8 Responses to Taking Charge of Your Cash Flow Calendar

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  7. I agree with your article. Cash Flow Projections are a must for all businesses. Many businesses don’t have a clear understanding of how their cash is being utilized. A business may look at the P&L (Income Statement) and see a year to date profit, but the balance in their checking account reflects a much lower balance and they wonder why.
    I have detailed information on how to set up your own cash flow projection at http://www.smartbusinesscashflow.com.

  8. meredithawood says:

    Very true! Glad to see there are great resources out there for such, Kirsten!

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