• Naomi Cauley

Preparing a Cashflow Statement

Before we begin, it’s important to understand why preparing a Cash Flow Statement is essential for your business. I will be honest, it’s a bit of work to put together, so you need to understand why you’re doing it, or you will probably not push through to complete it. Having a cash flow statement can be one of the most important tools you can have for managing your finances. It helps you navigate the ebbs and flows of your business year and to make sure you have the funds available for bills as and when they are due. If also helps you make important business decisions with confidence, for example:

  • can I afford to expand my business,

  • when is the right time of year to invest in marketing my business,

  • when do I need to employ extra staff,

  • what time of year can I take some time off.

Put simply, a cash flow statement tracks all the money flowing in and out of your business. You use it to understand the cycles or seasonal trends of your business so that you know when you will need additional funds to meet your payments. It can help you plan ahead to make sure you are financially secure.

You will need to fill in actual or estimated figures against each of the items in the Cash Flow Statement Template. If you estimate, make sure you label it and note why you estimated that amount. You will also need to decide whether you are recording GST in the amounts or not. Make sure to note that on the Template as well so you can be consistent.

1. Opening Balance

The opening balance for your first month will be your bank balance at the beginning of that month. In all subsequent months, the opening balance will be the closing balance from the month before.

2. Cash Incoming

As the name implies, Cash Incoming is money flowing in to the business. You can predict cash incoming by looking at previous years, remembering to identify seasonal trends. Cash Incoming can include:

  • Sales

  • Customer Payments

  • Grants

  • Tax Rebates

3. Total Incoming

Total Incoming is the total of all Cash Incoming items for the month.

4. Cash Outgoing

Cash Outgoing is money flowing out of the business. You can predict cash outgoing by looking at previous years. You might also be able to determine that a percentage of Sales is taken up by cost of materials, cost of labour, and so on. Cash outgoing can include:

  • Accountant and Bookkeeping Fees

  • Advertising and Marketing

  • Purchases

  • Rent and rates

  • Utilities

  • Subscriptions, including professional memberships and software

5. Total Outgoing

Total Outgoing is the total of all Cash Outgoing for the month.

6. Monthly Cash Balance

The Monthly Cash Balance is what's left of Cash Incoming after all Cash Outgoing is paid. It's the Balance of Cash you can expect to retain that month.

7. Closing Balance

The Closing Balance is the total Cash you expect to be available at the end of the month. To calculate Closing Balance, you add the Opening Balance to Total Income and deduct Total Outgoing.

Cashflow Template
Download XLSX • 44KB

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