cash flow budget

7 steps to create your cash flow budget

cash flow budget

Every company is obsessed with cash. To stay afloat, companies need to ensure they have enough money available to fulfill their obligations such as paying salaries, vendors, suppliers, loans and investing back in the business.

As explained in part one, a cash flow budget shows you exactly how much cash is coming in and how much is exiting the business accounts.

Here are the steps to prepare your own cash flow budget:

1. Find the right tool

cash flow budget - Microsoft Excel

If you want to roll up your sleeves, you may already use a budgeting tool or software that can help you prepare your cash flow forecast. If not, a straightforward starting point is Excel’s cash flow template. If you have an accountant or bookkeeper, they will have likely already prepared a cash flow statement in the past and have a format recommendation that follows your previous financial reporting.

2. Set a time frame

Often, cash flow budgets will be prepared for six months or a full year in advance. Depending on whether you’re preparing this statement for yourself or for the purpose of securing financing, set your time frame and get ready to gather all the required information for that period.

Many businesses forecast on monthly timeframes, but some may need to know cash flow on a more regular cadence — weekly or bi-weekly.

3. Prepare a sales forecast

How much revenue do you expect to bring in during each month? You may base this on past months, years or projected sales forecasts. Then map out the expected sales forecast for each month of the year. Remember there will be fluctuations based on actual sales and changes in the market, as well as new customers added to your client list.

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4. Project cash inflows

This is your “cash in” that includes all forecasted sales — both cash sales and those for customers who pay on credit.

Also consider the terms of collection you offer customers, as your cash inflows will come after the actual date of sales. For example, if you sell $10,000 on January 15 with a 30-day term, then you should project $10,000 in your February inflow. However, if your clients typically pay late, you may want to be conservative and project that inflow in March.

5. Project cash outflows

This is your “cash out” and includes your fixed expenses based on scheduled payment dates as well as any variable expenses. Don’t forget to expect projected expenses such as plans for new equipment purchases or hiring additional staff. Ensure these are allocated in the right month, which may depend on payment terms and when you actually expect to make the payment.

Some main cash outflows might include:

  • Purchases
  • Payroll
  • Office supplies
  • Building repairs & equipment maintenance
  • Advertising & marketing
  • Rent & utilities
  • Insurance
  • Loan payments
  • Capital purchases
  • Any owner withdrawals

6. Calculate the ending cash balance

cash flow budget

Here’s where the calculations happen. If you’re using software like Excel, create a formula to add up all your cash inflows for each month and then your cash outflows for each month. The difference will show your monthly cash balance — which is your cash on hand.

Your cash on hand should also include the amount in your bank account, petty cash and any other cash accounts you might have. Positive numbers are your friends.

7. Set a minimum cash flow balance

How much cash will you need on hand every month? You’ll need a minimum starting point to cover all expenses and ensure you aren’t left in a cash flow deficit.

Review your forecast to check if any month throughout the year is projected below this minimum. If that’s the case, now is the time to take action and find a way to raise capital.


If your cash flow budget reveals that your business might fall short in the coming months, feel free to reach out and we’ll be happy to discuss ways to avoid any cash flow issues in the future.

Do you have enough cash flow? Find out in your cash flow budget

Will I have enough cash to stay afloat?

Part 1: Cash flow budgets to strengthen your business

Do you have enough cash flow? Find out in your cash flow budget

A company’s cash flow budget is a mainstay of their financial reporting and can be used to predict and forecast cash flow requirements. If you’re not currently looking at this type of report, here’s why you need to prepare one and what it can tell you about the business.

Why prepare a cash flow budget?

The cash flow budget is quite simply a report showing how much money is entering and exiting the business. It shows how much cash you’ll have on hand at any given period of time.

First and foremost, a cash flow budget is a plan for business owners and management to help understand their cash position and achieve their business goals.

Secondly, and just as importantly, a cash flow budget is usually required by anyone considering lending your business money. This plan helps demonstrate how your suppliers will be paid, how quickly your company can grow, and the financial viability of the business. It also shows the potential to declare dividends and increase owner equity, which may be an important aspect for business owners and shareholders.

The ultimate goal is to be cash flow positive: bringing in more cash than is going out.

What does a cash flow budget tell me?

A cash flow budget will estimate your future business income and expenditures, and will help you predict if and when you’ll fall short so you can take proactive measures to avoid those situations.

Once complete, the forecast will give you information on at least seven important points:

  1. What months you might run short on cash
  2. If you have enough cash flow to pay your bills at the end of every month
  3. If longer payment terms are potentially putting you in a cash flow crunch
  4. Whether or not you have the right minimum beginning balance for each month
  5. If there are seasonal fluctuations in cash flow
  6. If you can take advantage of unexpected supplier discounts
  7. If you need to raise capital

So how do you complete the ever-important cash flow budget? Read part two and learn the 7 steps to budget your cash flow.


3 Biggest Financial Challenges Facing Small Business Owners


When the going gets tough, it’s usually finance-related. Here are the three challenges you may be facing with your small business, and tips to overcome them.

1. Positive Cash Flow

Every small business knows that cash flow is a top priority. You need liquidity in order to channel funds into your other top strategic priorities.

According to Simon Dell at, this is a domino effect that not only impacts your business, but all the other businesses you work with.

“Personally I think the biggest challenge affecting any small business is cash flow. Every business, including mine, has suffered from, or suffers from issues with getting money in that is owed with them. The problem stems from a domino effect of one business having poor profitability earlier on in the chain that then starts to directly affect all the others, as many small businesses trade with other small business. Thus the situation compounds itself.”

The cash flow solution:

 Dell points out that this situation shouldn’t make you feel stuck in a cash flow rut.

“However there are a number of good solutions that can be implemented. The best two I have seen is invoice factoring – where another business loans you the value of the invoice that you’ve issued and pay you immediately. The second is to move your business, where possible, to a subscription business. If you can implement a direct bank transfer for services or goods at the start of the month, then that goes a long way to eliminating many cash flow issues.”

2. Money Management

It’s hard to find a small business owner who hasn’t felt the pressure of operating their business effectively while also managing all the day-to-day financial management. From dealing with expenses, receipts and invoices all the way to tax-time issues and end-of-year reporting, these are the administrative duties that most SMBs dread.

The money management solution:

Investopedia offers a straightforward solution: get professional help.

“Money management becomes even more important when cash is flowing into the business and to the owner. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea. The complexity of a business’ books go up with each client and employee, so getting an assist on the book keeping can prevent it from becoming a reason not to expand.”

3. No Access to Funding for Growth

“Year after year, owners listed access to funding as one of their most formidable concerns facing the future of their businesses,” states Ryan Weaver in The Globe and Mail’s business growth column.

Finding the right funding solution is important, as your business should consider loan repayment schedules and rates when weighing the options. Weaver goes on to suggest that, “Hundreds of small business grants and loans programs exist to help businesses expand, subsidize hiring, and allow firms to take part in projects and activities proven to increase global competitiveness.”

However, many SMBs face further challenges when traditional grant programs, government funding and bank loans aren’t an option. Often, small businesses can be denied loans when the company has a limited operating history, low gross margins or when their industry doesn’t fall within the bank’s criteria.

The funding solution:

Finding a trusted alternative lender can be the perfect solution in these circumstances. And many SMBs find trusted lending partners that they can build ongoing relationships with in order to access funding with much more ease. This can be a big advantage when business demands become timely, such as when you must fulfill an unexpectedly large order or hire more staff for a new project.

Business News Daily explains that alternative lending has some major positives. “Your business doesn’t need to have a perfect financial status, there are few restrictions on what the money can be used for, and the loans can be approved almost instantly.”

Asset-based lending may also be an option for businesses in a large growth phase that have significant business assets such as inventory, machinery or real estate to leverage. Consider looking at all the alternative funding options that can bridge you to the next step in your business growth. Your business is not restricted to traditional lenders and a trusted alternative source can give your business growth the kick-start it needs.