Skip to main content

Cashflow Simplified: This is probably the easiest way to write a Cashflow statement

Asaqeni business cashflow statement template

When starting a business or applying for funding, you will be required to prepare a cashflow statement. This is basically a simple projection of your cash inflows and outflows. It's main purpose is: 

• to ensure that your business doesn't run out of money.

So the document will show you any potential pitfalls, and that way, you can plan ahead e.g. proactively request a loan, defer payments etc. While business is unpredictable, most financial institutions(including investors) will need to be convinced that you've done your best to anticipate any possible events that could occur within your budgeting period. A Cashflow statement is a great tool to achieve that.

HOW SMALL BUSINESSES RUN OUT OF MONEY:

• You get a tender

You have a small profitable business but you think a tender is what you need to take your business to the next level. You apply for one and that uncle of yours helps you get the deal. You get the tender but you don't have the money. So you borrow from friends, relatives and even your friendly neighbourhood loan-shark. You supply the materials and then wait for payment. However if you've ever dealt with these huge companies, you will know that the bureaucracy often delays payments. Some of them process payments once or twice a month. Or in the case of govt, you might have to wait till shillow. You will get your money but after a very long time. However your creditors will not have the patience to wait for 6 months... and so you could eventually run out of stock or even get forced to shut down the business before the payment comes. This is where a cashflow statement comes in. *

• You sell on credit

If you are too friendly like me... and you struggle to say 'NO' whenever people talk to you nice nice... so all your friends just want to get goods on credit all the time. Some people can be funny. Someone will buy something on credit.... then they pay after two months and take something else of the same value. Which is like, they never paid. If this continues, your business will eventually run out of money. So you need a cashflow statement to help you plan ahead.

• You get a loan

Most small business owners tend to bite more than they can chew by getting capital expenditure loans before they are ready. (FYI- I recommend getting a working capital loan instead) Back to our story- You use your parents' title deeds to get a business loan. You plan to buy equipment from China. This could take 2 or 3 months before it arrives. However the bank expects your first repayment to be made a month after you get the loan. So you borrow from elsewhere to cover the loan repayment. By the time the equipment comes you're knee deep in debt, and don't even have enough money to maintain it or buy inputs. Your business dies a slow painful death.


As you can see- in all the above scenarios, it's not that the business ideas were bad or that it wasn't profitable. The businesses simply ran out of cash. A cashflow statement would have helped you anticipate and prepare for all those scenarios. However most people seem to struggle with writing a Cashflow statement, and the majority of those who do, don't even know how to use it. Which is why I'm here.

The logic behind it

It's actually quite simple. Just think of it this way... say you're planning a trip to town. You will need to ensure that you have enough money to go and come back. Next, you remember that someone owes you money. So you will plan to collect that money, buy groceries and leave some change for small expenses. You've done cashflow in it's most basic form.

Now let's apply that to your business. In business terms, a cashflow statement simply tells us:

  • how much money you started with
  • how much money you expect to receive
  • how much you will spend and how you will spend it
  • how much you will be left with at the end

It's simple right?

A few things to note

Try and anticipate every possible scenario.

  • Will you hire someone in August? Then the amount of your salaries should be stepped up in August.
  • Will sales go down in June? Then show that in your cashflow.
  • Will you only start making money 6 months later?
The most important things is to highlight that even when there's a dip in sales, you'll still be able to keep your business affloat. This shows that you understand your business as well as its cycles and seasonality.


So to help you get started we've created this simple cashflow template which you can use. It will calculate your monthly balances and give you your balance for the next month. You can then save it as a PDF document and you're good to go. Click the link below to check it out... free mahala.

Open the Asaqeni Cashflow statement template


Hope you found this helpful. As always, I wish you all the best in life and business.

Labels:

Comments

Post a Comment

Popular posts from this blog

Hip hop and RnB songs to apologize to your partner

Love is a beautiful thing, but it often goes wrong. This often leads to pain, suffering and sorrow.  Being imperfect beings, hearts tend to get broken all the time regardless how hard we may try to avoid it.  The heartbreak is often inadvertent but at times we find ourselves in the wrong. An oversight, a word unsaid or even a lapse in our judgement can cause our loved ones harm. This doesn't always have to be the end though. Oftentimes, relationships can be mended by simply uttering three simple words: "I AM SORRY". This article is a collection of some of my favourite 'I'm sorry' songs. I hope you'll enjoy these apology songs, but more importantly, I hope you will get a few quotables and some wisdom nuggets from them.  The best apology however, is to change behaviour (got that from a Jay Z interview) so as you apologize, please remember that it was your actions that hurt them. The best apology is one which involves you not repeating those same mistakes aga
Post a Comment
Read more

Php date: How to get the first and last day of the week

In this tutorial, I'll show you how to get the first and last day of the week in php. By default, in PHP the week runs from Monday to Sunday. However we'll cover two methods to get the first and last day for both those who consider Sunday or Monday as their first day of the week. We will be using 2 functions to achieve this: date() strtotime() We will use a combination of these two functions and store the result in a variable.  How to get the first day of the week If you want to get Sunday, use this method: $firstday = date('l Y-m-d', strtotime("sunday -1 week")); echo $firstday; If you want to get the date for Monday, this current week, use this method: $monday = date('l Y-m-d', strtotime("monday -1 week ")); echo $monday; How to get the last day of the week The following code will give you Saturday as the last day of the current week. $lastday = date('l Y-m-d', strtotime("saturday 0 week")); echo $last
Post a Comment
Read more

How to easily create background notifications in Sketchware(original)

How to easily create background notifications in Sketchware(original) One of the keys to building a successful app is to find mechanisms that will keep your users engaged. You can do this by using background notifications. This tutorial will show you how to do that in Sketchware. We will cover: 1. How to create notifications in Sketchware 2. How to show these notifications even when the app is closed.
7 comments
Read more