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How to Make a Simple Cash Flow Statement for a Business Plan

One of the most critical factors in the success of a business is in understanding the role of cash flow and how to manage cash flow in your business. The only way to have a complete picture of your company’s financial situation is to develop a cash flow statement.

Why is Cash Flow Important?

Creating a cash flow projection serves several important purposes. Just by taking the steps involved in developing a cash flow statement you’ll gain invaluable insight into the actual cash situation of your company. The process involves simply listing every instance of money flowing in and out of the company, on the accurate date that the occurrence happens. Doing this gives you the opportunity to see the big picture, particularly if you’ve never created a cash flow projection for your company. Seeing the reality of how money moves through your company allows you to identify and prepare for rocky patches ahead.


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Your cash flow statement reveals to you and anyone who reads your business plan exactly how much money comes in, how much money goes out, on what dates the inflow and outflows occur, and how much money is left over. Most importantly, the forecast shows how much money you’ll need to cover your expenses if you have less money coming in than you have going out.

What Is Cash Flow?

In the simplest of accounting terms, cash flow is:

Cash In – Cash Out = Net Cash Flow

How to Make a Simple Cash Flow Report

Begin by creating a list of your monthly income streams. Examine the history of when your customers actually made payment after you provided products or services to them. How many days did they take to pay you? Are there seasonal fluctuations you need to take into account? If you have historical accounting data, use it to project what your future revenue will look like.

Next, go through the company’s expenses and make a thorough list of how much money actually flowed out of the company. Where did all the money go? Review the checks that were written and all credit card transactions for the past year. Take everything into account.

To set up a cash flow forecast, try the following process:
  • Create a spreadsheet by setting up column headings for a twelve-month period, one column for each month.
  • Make two main groups for the rows: an Income section and an Expenses section. Each row should have a subtotal for each month and running totals at the end of the row.
  • Enter financial data into each cell for each row. Try to use historical data. If your company is new and you don’t have historical data, make the best conservative estimate possible.
  • Calculate the totals at the bottom of the columns by subtracting the Expenditures subtotal from the Income subtotal for each month. The amount left over is the net cash flow for that month.
After you prepare a cash flow statement, review the forecast with your accountant. If you’re seeking funding for your company, bankers and investors will review your cash flow statement not only to understand the company’s financial situation but also to see how you’ve managed your company’s cash in the past.

Don't Overestimate Your Revenue

Try not to make assumptions or paint a rosier picture than the actual situation. When trying to define future revenue, make sure your forecasts are realistic and based on actual data. If anything, overestimate your expenses and underestimate your sales. Be aware of potential cash crunches as far in advance as possible, as getting a bank loan or line of credit is far easier when you’re not in the middle of the crunch.


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