A “CASH-IN / CASH-OUT” STATEMENT

It is important for sustainable growth to know where you are in your business on a monthly basis.

Your challenge today is to create a “cash in and cash out” statement for last month.

This is not intended to replace a budget but to give you an idea as to how your cash flow was for last month. The following steps will guide you in this process:

1. Make a list of all income received. This does not include any billing for which you have not been paid nor any outstanding funds that are owed to your business.
2. On the expense side do the following:
   o     Make a list of all outflows in the way of cash, credit card and check payments.
   o     Include the cost of any items you ordered for the business that have not been paid for.

The difference (from a cash flow perspective) between these two figures will tell if you made more than you spent or spent more than you made.

While this is not a true “financial position statement” it gives you a glimpse as to how you manage your income and expenses cash flow. If you end up being negative, it will make you aware of potential issues that will affect your growth. Borrowing on your credit card or using your savings to sustain a business for any length of time with the anticipation of future income, is the way most small businesses start. The key is to develop a monthly budget which shows at what point in time the income will exceed the outflow.

Cash flow management is one of the most “ignored” practices in small business accounting. Because your small business is all about creating a positive cash flow, I advocate that you spend at least 3 hours a week working on your accounting. There are many software options that allow an owner to take care of their basic accounting needs, or a small investment will allow you to outsource this function so you can concentrate on what you do best.

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Tips & Advice by Nick Petra, CFP – Founder of BizQuack and StrategicDuck
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