Creating Your First Year Cash-Flow

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How to complete the cash-flow statement

Here’s a breakdown of the different parts of the cash-flow statement

We’ll explain what each section is for and what you should put in it:

Month

The very first row of the statement is labelled Month. Month 1 is the first month you will be in operation. Depending when you launch your business that could be any month of the year – it does not have to be January. You can re-label each individual square to reflect the name of each month if you wish. Remember also to reflect the correct year – the xls spreadsheet defaults to 2015.

Funds In

The next section will contain your Funds In forecasts ie all the monies you expect to receive from your sales of products or services each month and also any other payments that are incoming to your business. Generally, the following categories will be included:

Total Sales

This is money that is paid into your business for your products and services at the time the products or services are provided or agreed upon ie a client enters your store and purchases an item over the counter or a client orders and pays for a product online which you then put in the mail for them or a client orders or attends for a service and pays for it at the same time.

Tip: Include all sales whether paid for in cash, credit card, cheque, PayPal or transfer etc.

Sales on Account

Also known as Accounts Receivable. This is payment received for goods or services which have already been provided and a payment schedule or payment terms were agreed upon ie instalment payments or a 60 or 90 day credit term period etc. For the purposes of the spreadsheet, enter the total Sales on Account figure as a negative.

Accounts Collected

Once payment is received, it is entered into the month it is received – not the month the product or service was provided. For the purposes of the spreadsheet, enter the total Accounts Collected as a positive figure.

Business Loan Proceeds/LOC

Any proceeds from business loans or available business LOC which will be used to fund the business should be detailed here.

Tip: Remember the Cash-flow statement is an estimated forecast of what you anticipate to flow in and out of the business. It is not an actual statement of fact.

Funds Out

The second part of the cash-flow statement is all about what monies will becoming out of the business – the expenses. Several categories of expenses are listed – we’ve kept it simple so that you can easily roll-up expenses. However, if you prefer to list them out more distinctly you can add additional sub-categories. For example, you may want to divide the overall category of Staff Costs into: wages, deductions, benefits, training etc. Equally, you can ignore those that do not apply.

Tip: You do not have to have an entry for each category in every month – you may only have one expense listed for a particular category per year.

Tools/Equipment Costs

Purchase and maintenance of tools, vehicles, machinery, furniture and equipment including initial purchase and repair costs.

Supplies/Inventory Costs

Supplies purchased to provide your business service, your products or create your inventory.

Property Related Costs

Any tax, rent or lease costs related to the business buildings. Any costs related to the renovations, insurance, maintenance or repairs of the business buildings. If you have a home-based business, check with your tax department to see roughly what proportion of expenses can be listed here.

Utility/Phone Charges

Bills for the natural gas, water, electricity, internet access and phone supplies for your business buildings or applicable staff. If you have a home-based business, check with your tax department to see roughly what proportion of expenses can be listed here.

Business Administration Fees/Charges

Any fee or charge related to the formal administration of the business in terms of local or federal authority requirements ie business license; business insurance ie in order to provide your services (building insurance should be in the Propery Related Costs section); or fees to support the professional status of the service you are providing.

Automotive Maintenance Costs

Any vehicle related expense including petrol, repairs and maintenance costs. If you use a personal vehicle for your business, check with your tax department to see roughly what proportion of your expenses can be listed here.

Clerical Supplies/Software Costs

Office supplies or computer software costs used in the daily administration of your business.

Advertising/Marketing

These are your costs related to advertising, promotion, and other marketing related activities including network membership fees, website development/maintenance costs, social media administration, business card creation etc.

Professional Services Fees

Accountant, lawyer or any other professional service you may need to help manage the business.

Staff Costs

This category should include any expense related to your staff. It should reflect all employees (part time and full time), even if you expect to recruit them part way through your first year (start the expense in that month). Include: wages or salary, employee deductions that you are responsible for paying (UIC, CPP, WCB, Vacation Pay – usually amounting to around 10% of wage costs) and any additional benefits you may be providing ie private medical insurance, mileage costs or uniform contribution etc.

Bank Charges

Any fees relating to maintaining business bank accounts (ie annual or monthly fees) or for processing payments from your customers (ie maintaining a Merchant Account, PayPal charges etc).

Owner’s Salary

If your business will be providing your income, state the amount you will be drawing from the business on a monthly basis. Also called the owner’s draw, this amount may vary from month to month or may not figure for you at all if you have another source of income. It is important to think this through however, as you may need your business to cover your personal costs.

Loan Payments

The cost to repay any loans that your business may require. This includes loan payments from banks and other lending institutions, lines of credit, or credit cards in your business name or fees related to maintaining those accounts.

Available Funds (at end of month)

This is the ending balance for the preceding month. With Cash-flow statements we are looking to see what your business funds look like from month to month ie how they flow from one month to the next.

Activity

It’s time to create your own Cash-flow statement. Remember to review your business plan up to this point to ensure that you include all the incoming and outgoing monies related to all your products and services. Complete the table in the worksheet, use the .xls download or create your own, asking any questions you may have here. Below you’ll find two additional things to download:

The Cash-flow Excel spreadsheet
An example spreadsheet completed by one of our Case Study participants, and his notes to explain what he learned by completing the process.

Downloads

The Small Business Simple Cash-Flow Spreadsheet

The spreadsheet will help you enter the numbers for your first year projects. It should be downloaded and edited in either Microsoft Excel or Google Sheets.

Mike’s Example Cash-Flow

Mike’s example spreadsheet will show you how one of our case study participants approached this exercise. There are some notes at the end of the table which reveal some of Mike’s thinking after he created the spreadsheet – it didn’t look like he would be meeting his goals. So he decided to think about his services in a different way to see if he could improve on those numbers.