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Why Monitor Cash Flows?

While we can try to estimate how many sales we will earn, the real figures we need to monitor is the actual cash in our bank accounts. Some clients might pay slower than expected. Some projects might take longer than expected, delaying the final payment. In short, we need to predict the flow of actual cash flowing into as well as out of a business.

A cash flow statement is the most important financial statement because it determines your ability to meet monthly expenses when they are due. It also helps plan your financial growth and determine if you need to adjust your business model. It also will help to determine if you need to obtain financing.

Cash flow does NOT necessarily equate to profit, but it shows if your business is sustainable. At some point, you will need to start paying yourself if your business is to be sustainable. Cash flow is the centre piece that tells the story of how your business will unfold.

Remember, cash flow is more than just numbers: it translates into actions you need to take and helps you determine your priorities.

As with all financial forecasts, this is a projection, so you will need to make some assumptions. To construct cash flow, you need to identify where the money is coming from, where the money is going, calculate the monthly net cash flow, and determine the monthly cumulative cash flow.

Forecast the flow of cash receipt and disbursement during a business year.



Read this article to learn 10 critical cash flow rules: [ ]


When done, we’ll learn how to calculate your monthly cash flow and the accumulated balance of cash in your bank for Year 1.

What to Monitor

The types of cash to monitor are both those that flow in and flow out. Here is a summary:

* In the event you will have a loan, you need to consider debt payments on a monthly basis. Use this loan repayment calculator to determine your monthly payments:
** An owner’s draw is what you will pay yourself, assuming you are not an employee of your own corporation. If you are incorporated and take out money in lump sums, you can re-name this withdrawal as “Shareholder’s Loan”, and you have to clear those loans regularly. Or you can simply label it as ‘Due to/(From) Shareholder”

Creating a Cashflow Statement

Below is a sample and worksheet to create your cashflow statement. Follow Jake’s example and assumptions to calculate when you think money will flow into and out of your business.

Then review the final cashflow prediction to determine if you can improve it, consider a different business model or require financial support.

Case Study

Download Jake’s cashflow forecast reports and refer to it as you go through each of the steps of the worksheet.


Download the Cashflow Forecast worksheet to determine your monthly and accumulated cashflow for Year 1. You will have to provide Year 2 for the business plan requirements.

Note: Feel free to set this up in an Excel spreadsheet with formulas if you are comfortable with that software.