What is a cash flow spreadsheet?

Whether you run a global corporation or a small business, how you manage cash flow determines whether a business lives, thrives, or dies. Smart business owners partner with an accountant who routinely manages cash flow because they know it provides valuable insights into their business. They make operating decisions based on the availability of cash and plan for future projects by saving cash or utilizing debt.

A question we are often asked is, “how much cash does my business actually have?” What cash is already allocated to future expenses and what is free cash flow? The answer can only be determined through excellent cash flow management and it starts with a specific type of spreadsheet – the Cash Projection model. Some accountants refer to this type of file as the “13 Week Cash Projection.” The thought behind it is that if you can predict your company’s cash needs for the next quarter (13 weeks), you’re in good shape.

Manage your financial position with a cash flow model.

The balance listed in your banking app should never be the basis for financial decisions. At first glance, the bank account can look healthy, but it doesn’t take into account future outflows. The 13 Week Cash Projection rolls forward your “book balance” (the amount of cash you actually have) on a weekly basis while taking into account estimated inflows and outflows.

We believe that this cash flow model should be updated every week after the books are brought current by the accounting staff. This ensures that you are using the most current data from the general ledger.

We’ve recently discovered an app that helps automate the process of preparing the 13 Week Cash Projection spreadsheet. In this video, Amy Walker, CPA demonstrates how she’s using LiveFlow to prepare cash forecasts for her clients.

Not knowing your cash position can be dangerous and expensive.

These days, money isn’t cheap. The use of debt is strategic and you don’t want to be in a position where your business is desperate for cash. Interest rates are climbing and “quickly approved” loans often carry a high price tag in interest and fees. While this type of funding fixes the short-term need for cash, it typically ends up becoming a burden when it’s time to make the loan payments. Also, business loans used to be fairly “easy” to obtain but a tightening economy has funding sources drying up. Staying in control of your own cash flow, rather than being at the mercy of outsourced funding, is the best way to keep in control of your finances.

We advise our clients to combine the powers of a cash flow spreadsheet with the expertise of a financial-minded CPA or accountant. You will be able to forecast when cash balances will be low so you can prepare in advance. Best of all, as a business leader you won’t find yourself in the position of making cash related decisions quickly and under pressure. Well managed cash flow means you won’t be caught off guard; you’ll have time to consider your options and make the right strategic decisions for your business.

If you’re constantly worried about cash, using our spreadsheet is a great place to start.

If you’re unsure of your financial position or worse, anxiety is preventing you from taking a hard look at your finances, the best thing you can do is find an exceptional CPA to start preparing your books and preparing a cash flow projection. You cannot measure what you do not track and you can only control the things you know about. There is always a solution, but first you have to know where you stand.

Start with our (free) spreadsheet template. You can download it here. If you have questions on how to use it, or you would like to discuss your cash flow circumstances, fill out our form and we will be in touch.