How to make a Cashflow overview?
Calculate your finances and be in control.
Quite often enterpreneurs can go bankrupt due to a poor cashflow. Managing the cashflow helps you assess the coming cost versus income way in advance. It creates financial discipline and reduces risk. When you are doing this, you are thinking broader, what’s going to come. This thinking on future spending and cash in out alone already gives you a handle on what you can expect. This forward thinking really helps.
Steps to take create your Cashflow Overview:
1. Start with Excel or Google Sheets (download here) to write down the numbers:
Your Starting Capital (on date /1/1/2021) – Setup in monthly way (for example – the savings for your business)
Total Cash In:
Add: (+): write your income (in your currency)
Add: (+): extra funding (assess per month)
Total Cash out:
Subtract (-) : Expenses / running expenditures:
Subtract (-) : Taxes, website costs, staffing costs, rent, expected incidental costs/expenses
Subtract (-) : Interest on loans, repayment, IT costs, etc.
Total Cash change
Total Cash for the month
and then write down the numbers per month for one year
then try to get 1-2 years ahead.
Calculate your ‘runway’
- Total money in the bank / amount you spend average per month = # of months ‘runway’
At first, you will not get it quite right, but after 2-3 times fill ins and rechecks, the cashflow overview becomes clearer. After a while, you will get a feel for this. This will help you get more thinking on ‘what’s coming’ and ‘what is my business spending cost’ and how to handle it. We think this is an essential exercise for your business. Also you need this for the bank. Getting better in this kind of financial discipline helps you control your business and be a master your personal income, and thus doing this exercise reduces your financial risk of not having money.