Calculating operating capital is a useful process for business planning because it enables you to anticipate shortfalls and surpluses, providing information that can be instrumental when introducing new processes and products. A cash flow projection is a document that tabulates upcoming income and expenses, enabling you to calculate operating capital for planning purposes. The information you include in your cash flow projection should be based on past sales and spending patterns in order to develop a realistic assessment of future capital availability.
Things You'll Need
Prepare a spreadsheet for your cash flow projection for the upcoming year. Devote a column to each month, and use the column on the far left to label the lines representing your different categories of income and expenses.
Label the top line "Cash on Hand." Skip a line, and label the top section of the page "Incoming Capital." Devote a line in this section for each type of incoming cash, such as income from sales, rental property, interest income, loans and capital infusions from stakeholders. Label the bottom line of this section "Total Available Cash."
Skip a line, and then label the lower half of the page "Outgoing Capital." Label the lines in this section according to each type of expense that your business incurs, such as rent, labor, materials, advertising, equipment, research and development, fees and licenses, loan payments, interest and owner's salaries. Label the bottom line of this section "Total Outgoing Capital." Skip a line and label the bottom line on the page "Net Capital."
Fill in the spreadsheet with the figures for your anticipated income and expenses for the upcoming year, month by month. Add your monthly income as well as your monthly expenses. Subtract each month's total outgoing cash from the total available capital to calculate the net capital for that month. Transfer each month's net capital to the next month's top line to represent the starting cash on hand for the following month.