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Cash Flow Budget Template

Cash flow issues are the leading cause of small business failure, according to the SBA. Many entrepreneurs start out with a limited view of how to manage the finances of running a business. The process is a bit more nuanced than a personal budget, and it can be easy to get overwhelmed. The good news is, a basic cash flow analysis is fairly easy to will help you do a temperature check on your business, and identify ways to improve, and create a more effective budget. Let’s break down the basics to help you create a good foundation online.

What is Cash Flow?

In order to perform a cash flow analysis, you need to create a cash flow statement. This document simply serves to establish how much income you have left over after you have paid all expenses for that month or year. 

To determine this, you simply need to use the following formula:

Total Incoming Revenue  – Total Expenses = Net Cash Flow. 

That net cash flow number is going to fall into one of three categories: Positive, negative, or neutral. This information will tell you if there’s an issue in the health of your business.

Positive cash flow is the ideal. In this case, your cash in is higher than your cash out – leaving you with “extra” money as a buffer. A positive cash flow may allow for additional steps to save, invest or to use to grow your business. This is what you want to aim for.

Negative cash flow means that your cash in month to month does not cover you monthly expenses – which leaves a deficit. That means you may not be able to pay vendors, employees, or other overhead costs. Over time, this can kill your business – and impact your personal finances.

Neutral cash flow means that when you subtract your expenses from your revenue – you break even. While better than a negative cash flow – this is also not ideal. You really want to strive to have money left over after you’ve covered your expenses.

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Why is Cash Flow Important to My Business?

It is often said that cash flow is the life blood of a small business. It very literally is what keeps a business going. Without a sufficient cash flow – you cannot pay your vendors, your office lease or building fees, you may not be able to cover payroll or taxes. Some of these issues have immediate, devastating effects for your business and your employees. Over time, cash flow issues will make it impossible to operate. You will have to close. Passion is great, but you need money to keep the business going.

Every business goes through hard times financially at some point in their lifecycle. By continually monitoring your cash flow budget, planning ahead, and making adjustments along the way is the best way to avoid your business becoming a statistic.

How to Use the Cash Flow Budget Template

To help you do regular temperature checks on your cash flow health – I created an easy to use cash flow budget spreadsheet.

If you own an existing business – the first thing I want you to do, is to run your cash flow for the past year. Pull out your statements over the last twelve months and plug the numbers into the spreadsheet. First, this will help you get familiar with how the projections play out using this tool. Second, this will help you identify which months led to a negative cash flow or a neutral cash flow – and which saw a positive cash flow. As you go through this year, you can compare those numbers to help you identify trends and make more informed decisions.

 I recommend using this template to monitor your cash flow budget on a monthly basis. Every month, schedule time to sit down and input your revenue, expenses – keeping in mind the timing of when your revenue comes in, and when your expenses are due out.

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