Businesses generally create an operational cash flow statement on a monthly or quarterly basis. It is a good idea to make one at the end of the financial year as well to evaluate the business’s overall financial success and health. In an article for “Forbes” magazine, Rick Wayman states that an operational cash flow statement is one of the best ways to learn about your bottom line because it is difficult to manipulate the results.
Information to Gather
To create a cash flow statement, you will need information about your financial activity through the year. Information to gather can include monthly or quarterly cash flow statements, bank statements, accounting records or receipts. You can input the information into a spreadsheet on your computer or do the calculations on a piece of paper. You will create a maximum of 15 columns on the spreadsheet or paper.
Labeling the Columns and Rows
When you create a cash flow statement, you subtract the sum of your business expenses from the sum of the income earned (Income-Expenses=Cash Flow); the spreadsheet you build will help you accurately do this. Beginning on the second column, label it “Start-up” if you have a new business. On the following 12 columns, write months of year, starting with the first month of your fiscal year. Alternatively, you can label the columns with the four quarters of the year. Write “Total” in the last column. Beginning with the second row in the first column, write “Starting Cash Balance.” Label the following rows: “Income/Cash Flow,” “Available Cash Balance,” “Expenses/Cash Outflow,” “Loan Uses,” “Total Cash Outflow” and “Ending Cash Balance.” You will need to create the following sub-rows under “Income/Cash Flow”: “Sales,” “Accounts Receivable Collections,” “Cash in Form,” “Owner’s Investment,” “Loan Proceeds” and “Total Cash Inflow.” Under the “Expense/Cash Outflow” row, create the following sub-rows: “Expenses/Cash Outflow” row: “Inventory Purchases,” “Total Cash Operating Expenses,” “Loan Payments,” “Capital Purchases” and “Owner's Draw.”
If you started the business this year, the amount you would enter in the “Start-up Column” is $0. Otherwise, enter the cash balance for each respective month or quarter, add the figures and enter the sum in the “Total” column. You will need to add the figures entered in every row and input the sum in the “Total” column. Enter the funds you received from actual cash receipts in the “Sales” sub-rows, under the “Income/Cash Flow” row. Enter the amount of money you expect to receive, if any, from sales you made in the “Accounts Receivable Collections” sub-rows. In the “Owner’s Investment” sub-rows, enter the amount you invested in the business, if any. If you have a business loan, enter the amount of cash used for it in the “Loan Proceeds” sub-rows. Add all the figures you entered in the “Income/Cash Flow” sub-rows and enter the result in the “Total Cash Inflow” row.
As when you calculated the income, you will need to add the figures entered in every row and input the sum in the “Total” column. Enter the amount spent on merchandise and inventory in the “Inventory Purchases” sub-rows. Input the sum of all your fixed, periodic and variable expenses under the appropriate month or quarter in the “Total Cash Operating Expenses” sub-rows. If you have a business loan, enter the amount you paid toward the principal, plus interest in the “Loan Payments” sub-row. If you made any large purchases during the year, enter the amounts in the corresponding columns and “Capital Purchases” sub-rows. Enter the amount of your business’s cash you used for personal expenses, if any, in the “Owner’s Draw” sub-columns. If you used a business loan to help fund start-up costs, inventory purchases or to purchase a building, enter this amount in the "Loan Use" row. Add the totals of the “Expenses/Cash Outflow” sub-rows and the “Loan Use” row and enter the sum in the “Total Cash Outflow” row.
Calculating the Annual Cash Flow
Subtract the total entered in the “Total Cash Outflow” row, which represents your annual expenses, from the total in the “Total Cash Inflow” row, which represents your annual income. Write the sum in the “Ending Cash Balance” row (Total Cash Inflow- Total Cash Outflow= Ending Cash Balance). This sum represents your annual cash flow.
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