Cash-Flow Analysis

For many small businesses, cash-flow issues are a common and dangerous threat to survival. In fact, a study by U.S. Bank revealed that small businesses and startups fail 82% of the time due to cash flow frustrations. Staying on top of your company's cash position can help to assess your company’s performance and stay afloat during these uncertain times. Complete the activities, read through the educational information, and proceed to the models to explore your company’s cash flows.

Why a Cash Flow Statement?

Cash flow statements  are financials statements measuring the amount of cash and cash equivalents entering and leaving a company in a given period of time. Essentially, they help business owners understand where money is coming from, where it’s going, and how long their business can persist under certain circumstances.

The cash flow statement (CFS) can help a company measure how well it is doing generating revenue to pay off debt responsibilities and keep the business running. Models can range from extremely simple, quick overviews to complex models that take a deep dive into the companies finances. Overall, a proper CFS can help increase understanding on how a company operates, where money is coming from, and what it is being spent on.

 

PART 1: WHAT IS A CASH FLOW?

A cash flow represents how money moves within a company. It is comprised of two main parts: the cash inflow and the cash outflow.


PART 2: CASH INFLOWS

The first part of a cash flow statement that we will cover is cash inflows. Cash inflows represent all the money coming into a business within a certain period of time. This can take the shape of sales, financing, or investments.


PART 3: CASH OUTFLOWS

Opposite a cash inflow is a cash outflow. Cash outflows represent all the money leaving a business. This can take numerous forms, including paying wages, covering rent and utilities, cost of delivery or packaging, paying off debt, giving dividends to shareholders, etc. A company is considered healthy if cash inflow exceeds cash outflow.

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Understanding Your Company's Cash Flows

Use the thought exercise to the left and answer the questions to help you prepare to construct a cash flow statement.

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Initial Cash Flow Projections

Now that you have completed Activity 1, you hopefully have some idea what cash is coming into and flowing out of your company. Click the button below to see a basic breakeven analysis.

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Interested in a More In-Depth Exploration of Your Company’s Cash Flows?

Click the button below for the advanced model and continue below for further instructions.

  1. Cash Receipts

 

a. Start in the “Cash Inflows” tab found at the bottom of the screen.

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b. Select the month you would like to begin your fiscal recording. The month selected in this tab will carry on throughout the rest of the Excel workbook.

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c. Next, input cash on hand for the first month only and the (pre)startup column. Then input data and projections for cash sales, collections from CR accounts, and loan/other cash injections in every relevant month. The sheet should then calculate the initial cash available.

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2. Cash Outflow

 

a. Next, move to the “Cash Paid Out” sheet. This is where we will record part of your cash outflows.

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b. Here, record fixed and recurring costs. This can including salaries, rent, telephone, utilities, and other subscription services. Line items for different cash payouts can be changes depending on business functions. NOTE: Only edit the white cells, the navy cells will change on their own. Do not yet include owner’s withdrawal or loan payments.

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3. Cash Paid Out (Non P&L)

 

a. After this, move the to “Cash Paid Out (Non P&L)” tab.

 

b. In this tab, include all the remaining sources of cash leaving the business. Here is where loan payments, capital purchases, and owners draw can be record. Once again, the line items can be altered. Additionally, this sheet will calculate total cash outflow, which just sums the values from the two sheets for this month.

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c. After this is completed, go back to “Cash Inflows” to see the final cash position at the end of each month. Note: If cell says “#####” that means it’s not wide enough for the value.