Instructions for the Cash Flow Statement
Cash flow statements are a critical component toeach business and business plan. These statements allow business owners to see how muchmoney is being brought into the company as well as how much money the company is spendingeach month or year. This is critical for businesses to see if they are making more money than theyare spending, if inventory is moving as quickly as it needs to, to catch possible theft that may behappening in the company, and if the business is keeping up with customer demand. The cashflow statement is quite a versatile and useful tool.Cash flow statements are kept in a spreadsheet format (like Excel) so that math calculations can becompleted with the computer. The following spreadsheet is an example similar to the one you willbe using to work on your cash flow statement. Please make yourself familiar with what kind ofinformation you will need to estimate for your task. In the example below examples are given for each category, they may not be the same for your business.
Line # and explanation:
6. Beginning Cash– this refers to the money that is in the bank at the start of the accounting
period. In this case, the start of the month.
8. Cash In—this refers to all the income brought into the business during the month. There may be several sources on income and they should be itemized.
9-12. Sales—this is the major source of income for the business. In this example, sales are made through retail items, wholesale items, and service.
13. Equity—this refers to money invested into the business by the owner or investors.
14. Loan – money that a company or business receives via a business loan from
bank or other lending source.
16. Total Cash In—this is the sum of all the sources of income throughout the month, so adds lines 9-15.
17. Cash Out—This introduces the section for all expenditures for the business.
18-25. Startup Costs- This is the topic line for all the expenses needed to start the business. Lines 19-25 are examples of possible start-up costs, they will be different for every business.
26-37. Operating Expenses- these are the expenses that occur every month and are necessary for the running of the business. Lines 26-37 are examples of possible operating expenses; however they will be different for every business.
38. Total Cash Out—this refers to all the expenses paid in the month. It is calculated by adding lines 19-37.
39. Cash Flow—this is calculated by subtracting line 38 (Total Cash Out) from line 16 (Total Cash In). This gives you a snap shot of how much money was made or lost in a single month.
40. Ending Cash—this is calculated by adding line 39 (Cash Flow) with line 6 (Beginning Cash). This tells you the total amount of money that the business has at the end of the month. The ending cash for the start up column will be the beginning cash for month 1.
6. Beginning Cash- beginning cash for each month is the same as the ending cash for the previous month.
CASH FLOW CHARTCompany Name:
Type of Business:
Startup / Mo 1 / Mo 2 / Mo 3 / Mo 4 / Mo 5 / Mo 6 / SUBTOTAL
6 / BEGINNING CASH
7
8 / CASH IN:
9 / Sales
10 / Retail Items
11 / Wholesale Items
12 / Service
13 / Equity
14 / Loan
15 / Other
16 / TOTAL CASH IN
(Sum Lines 9 thru 15)
17 / CASH OUT:
18 / Startup Costs
19 / Equipment
20 / Renovations
21 / Sign
22 / Inventory
23 / Licenses/Fees
24 / Accounting
25 / Utility Deposits
26 / Operating Expenses
27 / Utilities
28 / Purchases
29 / Advertisements
30 / Taxes
31 / Office Supplies
32 / Insurance
33 / Postage
34 / Wages
35 / Rent
36 / Owner's Draw
37 / Loan Repayment
38 / TOTAL CASH OUT
(Sum Lines 19 thru 37)
39 / CASH FLOW
(Line 16 minus 38)
40 / ENDING CASH
(Line 6 plus 39)
You will be asked to make the best, most educated, decisions on how much money you willstart your business with, how much (if any) loan money do you need, and so on. Below are some questions that you should consider when creating your cash flow statement. You may either print a blank copy of theCash Flow Form (at the end of this exercise) or download the Excel spreadsheet from the attachment.
Lines 9-12 Sales – Remember earlier in the competitionwhen you had to identify how much you decided to charge for your product or service? Nowestimate how much you believe you will sell each month for the first 6 months in business.
Line 14 Loan– Do you intend to obtain a loan for your business? If so, add the totalamount of the loan to the month you intend to receive it.
Line 24 Accounting – these are optional expenses for a business that are stronglyrecommended if the business owner is not very comfortable or knowledgeable about thesubjects as it relates to the business. These expenses may be minor in the first businessyear, but consider how much it would cost for an accountant to prepare the business taxesor prepare an annual report as well as how much a lawyer would cost to review a contract ortwo.
Line 27 Utilities – add up how much you spend each month on telephone, electricity,internet access, cell phone use and so on. Put the total for each month here.
Line 28 Purchases – Estimate how much you believe your business needs to spend each month onpurchasing inventory, supplies, etc.
Line 29 Advertising – how much do you want to spend on promoting your business eachmonth? Refer to your earlier answer on how you decided to promote/advertise yourbusiness. Find out how much your ideas cost and estimate how much you need tospend each month to reach those ideas.
Line 30 Taxes – You are not done with taxes after paying for your employees. You also owe yourstate and county taxes on any real estate your business owns as well as any property thebusiness owns (property includes office furniture, computer/electronic equipment, inventory,supplies, autos, etc.). If your business doesn’t own such things or the value of such itemshas diminished, then there are no taxes to pay.
Line 32 Insurance – this is the monthly expense for all other insurance policies your companycarries. You may wish to ask a local insurance agent to help obtain this estimate withyou.
Line 34 Wages – How much are you planning to pay employees? How many employees doyou think you’ll need the first year in business? Are you planning to give yourself a salarythrough the company? Are you planning to pay your employees an hourly salary (like $7.00an hour for 25 hours a week that would total $175) or is paying via “salary” (paying anemployee a set rate of money regardless of the hours worked i.e. $1,200 a month for a fulltime employee)? Put the total for all employees here.
Line 35Rent – how much do you anticipate in spending on rent? Are you planning to start yourbusiness at home? If so, how much space in your home are you using (5, 10 15%)? Youcan take that percentage and figure out how much of the mortgage payment is paying foryour business space, and put that number down. Otherwise, how much do you want to payin renting office or retail space?
Line 36 Owners Draw – this line is used to show how much the business owner plans to givethemselves from the company profits. Most startup ventures take several months or yearsbefore the business is stabilized enough to start drawing from the profits.
Putting Cash Flow Statements together is a tough task. Take your time in working through thisexercise and have your adult supervisor help look over your work. Make the best estimates thatyou can with the exercise and know that you can revisit this exercise to update as needed if youintend to open your business.