3 Easy Steps To Calculate Cashflow

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3 Easy Steps To Calculate Cashflow

Make Decisions from a Position of Strength, Not Fear – Easy Path to Cash Flow Confidence

When 6- and 7-figure entrepreneurs want to get to the next level in their businesses, I’m the CFO they call.  I help them get there by focusing on cash flow.  By that I mean providing clear visibility into their bank balances over the coming weeks and months that they can make intelligent decisions right now.

The biggest thing entrepreneurs face is understanding and knowing where their cash is coming from, where it’s going, and even more importantly – when it’s coming and going.

What’s my bank balance going to be next week? At the end of the month? At the end of the year?  We need to know that in order to make business decisions from a position of strength rather than one of fear.

Today I want to share something I learned while I was CFO in a multi-billion-dollar company. And it’s a “something” that applies as meaningfully to start-up companies as to Fortune 500 companies.

It is a simple, easy to maintain, and incredibly informative cash flow forecast.

And, yes, I’ve used this exact same format in a billion-dollar company, and in a pre-funding start-up (translated, that is a $0 revenue) company.

It really is easy to manage, and the results of putting it in place, can transform feelings of overwork and anxiety over “the other shoe dropping”, into a calm, relaxed understanding of what your bank balance is going to be next week, next month, and even 6 months from now.

So, if it’s so easy – can we reduce it to three steps? Yes; there are literally only three things you need to know:

  1. You need to know your starting bank balance
  2. You need to know what you expect your revenue to be next week.
  3. You need to know what checks you’re writing next week.

And – although 2 and 3 sound hard to estimate – they really aren’t! Let’s think about it a minute.

You know what money you are going to have come in the door if you really think about it for five minutes. You have some set of expectations for sales calls, or customer traffic, or lead conversions. All I’m saying here is just write it down.

And if you think that knowing how much you’ll spend next week is difficult, let’s make that easy, too. Simply go get your last two bank statements and look at what you spend each week.

You’ve just done a forecast!

Now all you need to do is think about that for the following week, the week after that, and the week after that.  Sure – it will be less and less “spot-on” accurate as you go out further in time; but it will be more accurate than not thinking about it at all.

Now all you need to do is think about that for the following week, the week after that, and the week after that.  Sure – it will be less and less “spot-on” accurate as you go out further in time; but it will be more accurate than not thinking about it at all.

What we’re talking about here is a 13-week Cash Flow Forecast, and included here is a link to a template to make it even easier:

13-Week Cash Flow Forecast Template

I really encourage you to give this a whirl.  It’s quick and simple and takes about 15 minutes a week at the most.

One of my clients recently told me that this exercise alone led to him realizing that he could relax and take time off and enjoy the holidays with his family. Isn’t it worth a try?

By |2018-11-29T10:03:14+00:00December 4th, 2018|Bookkeeping, CFO, Consulting|0 Comments

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