At its simplest, this is just a listing of when (and how much) money is going to come into the business; and when (and how much) money is going to leave the business. And it’s much easier to get your hands around those two things than you might think.
I will confess that the Excel spreadsheet may initially LOOK complicated. But it’s not! And the video walks you through it – or – even better – walks your bookkeeper through it!
Most small businesses have one business checking account. Have the bookkeeper look at the last three months of bank statements, and outline each of the different deposits and expenditures that hit your account on a regular basis. (And because many of us use credit cards, and our income is summarized into large receipts from Stripe or PayPal or Square, there really aren’t all that many transactions to review.)
WHAT COMES IN – DEPOSITS
Let’s start with the fun side: money that comes in. You know your sales pattern and cash collection patterns, so just ask yourself, “When my cash is going to come in the door?”
As an example, let’s just say you sell a course online, and historically you’ve sold five courses a week for $1,000 each. So, you know you’re probably going to get around $5,000 a week.
If you know you’re going to be on vacation or you’re going to drop your ad spend, or you’re going to raise the price of your course, then you just need to estimate the effect that will have and adjust the $5,000/week accordingly.
WHAT GOES OUT – EXPENDITURES
For the money going out it’s the same exercise. Look at each of your expenses over the last three months of bank statements, including each check or ACH that’s left your checking account. You’ll see routine monthly amounts for Facebook ads spend, your monthly rent, your monthly utilities, your monthly check to the cleaning people, your credit card bills – whatever it is that you’re regularly spending.
Figure out what week of the month you pay each bill, and drop those expenses into the columns in the spreadsheet.
Now put it in the 13-Week Cash Flow Forecast spreadsheet you downloaded above.
It’s really that simple. Don’t let anyone fool you that forecasts are “complex”. What you now have is a look at what the expected balance will be in your cash account each week for the next thirteen weeks! THAT’S a forecast!
So, download the spreadsheet, watch the video, and complete this exercise over the next week. Give it a try. See what happens. Have your accountant do it, have your bookkeeper do it, or do it yourself and be amazed at what you learn about your business.
Then next week we will talk about what to do about it when you see there’s a storm on the horizon. Don’t be alarmed if you see cash going negative in one of these periods. Next week we will find ways to fix that.
For now, be grateful that you have a line of sight into a coming cloud – rather than being surprised by it!