Every business, no matter the size, needs a cash flow plan.  You can’t make decisions without knowing what money is coming in and out.

Simply put, when you create a plan for your cash flow, you’re basically predicting or planning how much money you’re going to have in the bank over a certain period of time. 

This could be by month, by quarter, or by year. 

A Cash Flow Plan Gives You Data

We all know that money is required to run a business.  But instead of only seeing it as the goal of your business, look at your cash flow plan as another data point.

When you make a sale or a lot of sales, you’re seeing revenue come in.  But how does that compare to what you planned on coming in?

At the same time, how does that revenue compare to the amount of money going out to pay for expenses and the cost of goods sold?

The data in your cash flow plan can help you see if your business is on track or if something needs to change.

Too many times, I’ve seen businesses struggle because they’re bringing in a good amount of revenue, but they’re also spending a good amount of money which leaves them little to no cash flow at all!   

If they had a plan, they would have been able to identify the problems in their business earlier.

 

Creating a Cash Flow Plan

One way to avoid bad business decisions is to plan your cash flow! 

I recommend you create a monthly plan by factoring in a few things:

• First, look at your current beginning balance. 
• Second, add in the income you plan to receive.  This is referred to as “cash in.”
• Third, deduct the expenses you expect or the “money out.”
• Lastly, determine what that ending balance is. The simple calculation is “Beginning Balance” + “Cash In” – “Money Out”

If your ending balance is negative, that indicates a problem in your business plan. If it’s lower than you’d like, see where you can adjust it. 

Maybe you can cut expenses?  Or, you brainstorm ways to increase your cash in.

This is why you want to keep a running cash flow plan.  There is nothing worse than balancing at the end of the month and seeing a number you didn’t expect.  

You want to be able to catch problems early.  So that you have time to make adjustments.

Start Simple

This is a very simple, easy-to-follow start to know your cash flow. There are definitely more complex ways to track your business’s cash flow.

I’m all about a good spreadsheet with more details.  However, that can come later once you’re used to tracking this information.  So for today, just use the easy way and get started!

Do You Want More Quick Tips Like This?

If you are a business owner looking to stop living from sale to sale, looking to create recurring revenue, and ultimately looking to create lifelong wealth, you need to join my free Facebook group. 

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