Keeping track of cash flow is extremely important when running a small business – and it doesn’t have to be that complicated. One way to set up a cash flow report is to organize it by weeks, laying it out over a short period of time like four, six or eight weeks. At the top of the report list your current cash on hand. Then, in each week record your expected receivables. This should be based on your clients payment habits. Review your accounting records to see when your regular customers pay their invoices. You will probably find that many clients pay on a typical schedule – perhaps right around the due date or a week early, or a week late.
Then record your expected payables in each week — include all payments you make like payroll, fixed expenses and debt payments. You should also be able to determine when these payments are typically made by reviewing your accounting records. It’s also a good idea to include a line item for miscellaneous expenditures. This should cover other ongoing expenses like meals and gas. Next, total up the receivables for week #1. Then total up the payables in week # 1. Then subtract total payables from total receivables. Then add that amount to your current cash on hand. This number should reflect your cash on hand at the end of week #1. Follow the same process for each week in your report.
Once you have completed the calculations for each week, you should have a good idea of your cash flow over the next month or so. This will allow you to forecast when you will be low on funds so you will have more time to come up with ways to compensate. Or, it will allow you to see when you will have an excess of funds so that you can better plan on when to pay down debts or place the funds in an interest-bearing account.