SBDC Template

Cash Flow Projections

Cash flow is key to business success. To help you map out your cash flow, we have two financial projections worksheets you can download:
Cash is absolutely critical to the growth and well being of your business. You must plan and prepare for all future events and market changes. The most important aspect of planning and bookkeeping is effective cash flow management. Failure to properly plan cash flow is a leading cause of business failure. Understanding your cash flow is important for five reasons. 

  1. First, you will need cash to pay your fixed costs, such as rent, utilities, credit payments, etc.
  2. Second, most businesses have seasonal cycles. For example, a retail business will probably have increased sales around Christmas; however, this will require a build up in inventory in the fall when sales and cash flow may be slower. It is important to set aside funds for these changes in revenue and inventory.
  3. Third, it is important to save for longterm investment and capital purchases such as a new vehicle or a piece of equipment.
  4. Fourth, you must have cash available, or a sufficient line of credit, for all emergency situations.
  5. Fifth, pay attention to the impact of necessary tax payments.
Failure to properly plan for all five will damage both the short-term and long-term potential of your business. For example, you must frequently keep inventory on-hand in anticipation of potential clients or you must purchase supplies for a contracted project weeks or even months before you receive payment for these goods. While it is important to have the necessary cash available to pay your bills, regardless of when your clients pay you, excess cash may be an indication of “idle money” with a potential for a greater return if invested in another part of your business.