Cashflow Statement Made Simple: A 10 Step Guide

Published by Lorne S. Wellington on March 15, 2017March 15, 2017

Creating a cashflow statement for your business is a necessary tool for business management. In this week’s Coffee Break episode, I share with you what is cashflow is, why it is important to your business, and how to create a cashflow.

Now it’s time to create a cashflow for your business. The step by step directions are below.

1. Make a list of your income sources and indicate the average sales price. If necessary group them into categories. Example from my lingerie business, Bras $60, Panties $27, Shapewear $35, and Accessories $12.
2. Make a list of your general expenses and indicate the average amount for each expense. Example from my lingerie business, Phone $60, Lease $850, Marketing and Promotion Ads $65, and Parking $12.
3. Make a list of what it costs to make or produce your product or service. In the accounting world that is called Cost of Goods Sold (COGS), in the apparel/fashion world that is your Cost Sheet. For retailers of any kind, this is the wholesale price for your goods. Example from my lingerie business, Bras $32, Panties $17, and Shapewear $20.
4. Starting with the first month using the excel sheet I provided (Sample Cashflow in Excel), determine the number of sales you will make for each product, service, or category. Complete the math for each. Then add up the total.  Example:
   

   		January
   Income
   	Sales Price	Qty Sold	$
   Revenue (Sales/Income)			$0.00
   Product 1	$        90.00	10	$      900.00
   Product 2	$        55.00	10	$      550.00
   Product 3	$        62.50	10	$      625.00
   Total Revenue			$  2,075.00

5. In same sheet and month, subtotal all of your monthly expenses. Example:
   

   Expenses		Qty Needed	$
   Lease	$  1,000.00	1	$  1,000.00
   Insurance	$        20.00	1	$        20.00
   Phone	$        75.00	3	$      225.00
   Brochures & Biz Cards	$     275.00	1	$      275.00
   Social Media Firm	$     500.00	1	$      500.00
   Web Hosting	$     105.83	1	$      105.83
   Merchant Services			$        62.25

6. In the same sheet and month, calculate how much your COGS, raw materials, or whole purchases you will make in that month. Multiply that figure by the dollar amount. Then subtotal. Example:
   

   Product 1 COGS	$        36.33	20	$      726.57
   Product 2 COGS	$        22.95	30	$      688.60
   Product 3 COGS	$        25.83	25	$      645.71

7. Add up the general expense subtotal and the GOGS subtotal. See example below the total expenses are $4248.95.
   

   Expenses		Qty Needed	$
   Lease	$  1,000.00	1	$  1,000.00
   Insurance	$        20.00	1	$        20.00
   Phone	$        75.00	3	$      225.00
   Brochures & Biz Cards	$     275.00	1	$      275.00
   Social Media Firm	$     500.00	1	$      500.00
   Web Hosting	$     105.83	1	$      105.83
   Merchant Services			$        62.25
   Product 1 COGS	$        36.33	20	$      726.57
   Product 2 COGS	$        22.95	30	$      688.60
   Product 3 COGS	$        25.83	25	$      645.71
   Total Expenses			$  4,248.95
   Net Profit/Loss			($2,173.95)

8. Then subtract your total expenses from your total revenue. If is positive, GREAT. If it is negative, do not worry just yet. In this example the business made a loss for the month of January.
9. For the next month, start with the profit or loss from the previous month and repeat steps 4 thru 8. Example:
   

   		January		February
   Income
   	Sales Price	Qty Sold	$	Qty Sold	$
   Revenue (Sales/Income)			$0.00		($2,173.95)
   Product 1	$          90.00	10	$        900.00	20	$       1,800.00
   Product 2	$          55.00	10	$        550.00	30	$       1,650.00
   Product 3	$          62.50	10	$        625.00	25	$       1,562.50
   Total Revenue			$     2,075.00		$       5,012.50
   Expenses
   Expenses		Qty Needed	$	Qty Needed	$
   Lease	$     1,000.00	1	$     1,000.00	1	$       1,000.00
   Insurance	$          20.00	1	$          20.00	1	$            20.00
   Phone	$          75.00	3	$        225.00	3	$          225.00
   Brochures & Biz Cards	$        275.00	1	$        275.00	0	$                  –
   Social Media Firm	$        500.00	1	$        500.00	1	$          500.00
   Web Hosting	$        105.83	1	$        105.83	1	$          105.83
   Merchant Services			$          62.25		$          150.38
   Product 1 COGS	$          36.33	20	$        726.57	30	$       1,089.85
   Product 2 COGS	$          22.95	30	$        688.60	40	$          918.13
   Product 3 COGS	$          25.83	25	$        645.71	45	$       1,162.28
   Total Expenses			$     4,248.95		$       5,171.46
   Net Profit/Loss			($2,173.95)		($158.96)

10. You see in the above example, the business is still operating at a loss but it is a less of a loss than the previous month. Keep doing this until you calculate 12 months of revenue and expenses.
11. Viola! Your cashflow is done!

Don’t be intimidated by the numbers or the process. Creating and using a cashflow statement for your business will prove invaluable.

Wishing Your Much Success!

WANT TO USE THIS IN YOUR BLOG, E-ZINE OR WEBSITE? You can, as long as you include this complete tag with it: Lorne S. Wellington, MBA. She has been consulting and advising businesses and nonprofit organizations for over 15 years. In addition, she created a nonprofit in 1997 and today she owns Sculpted Silhouette, a lingerie boutique in Los Angeles. Her clients are located in the USA, Italy and South Africa.