How to Prepare a Cash Flow Analysis

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Preparing a cash flow analysis helps track your transactions. An integral part of business accounting, it will help you realize how much money you actually have to work with, how much you can reinvest and how much you can withdraw for personal expenses. One of the first financial forms you will encounter, the cash flow anyalysis should be prepared often.

Instructions

1. Estimate your annual gross income as the first step in preparing a cash flow analysis. Allow for subtractions if your business is not operating at full potential. For instance, if you own an apartment complex, you add the amount of rent for each month, but subtract an estimated amount for unforeseen vacancies. The longer you are in business, the easier it will be to predict operating losses.

2. Add any other income you receive and you will arrive at your "effective gross income." This is a reliable business accounting figure that represents your entire annual projected gross income. Write this number down for future figuring.

3. Compile a list of the expenses you incur in order to operate your business. Separate this by category. Think about the purchases of big equipment you make. If you have a painting business, you would write down the expenses you pay annually for paint sprayers, rollers, brushes and drop cloths.

4. Write down all your office expenses, utility charges, advertising expenses and other fees you pay for equipment repairs and maintenance. Everything you need to purchase in the operation of your business counts.

5. Remember to include professional fees and taxes in your cash flow analysis. If you have an accountant, his fee goes here--so does insurance policy expense, worker's compensation payments, unemployment insurance fees and taxes charged on your equipment or building.

6. Add your business accounting expense together and double check your chart of accounts to make sure you got them all. This number represents the total amount of expenses necessary to operate your business. Write it down beneath the effective income figure.

7. Figure out your debt service. Calculate the amount of payments you will make to the bank for loans, mortgages or other financing. Add these together and write the number down beneath the total expenses figure.

8. Subtract the total expenses and the total debt service figures from the effective annual income number. This is your cash flow analysis for the year.

Tips & Warnings

• Re-figure your cash flow analysis any time your potential income or expenses alter.

• Don't waffle when complying your business accounting forms. The sooner you do them, the better your view of the finances will be.

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