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10 Cash Flow Strategies for a Successful Business

Strategy 7: Prepare 3 month cash flow plans
Cash flow is all about timing. A business can be profitable and still have cash flow problems. For example, ABC bought stock for
$5,000 in February. They paid for the stock at the end of March. The stock was sold to XYZ for $10,000 in April and they received the
money for the sale in June. In April ABC has recorded a profit of $5,000. However, the profit doesn’t hit the bank till two months later.
Prepare a three month cash flow budget. A cash flow budget includes all the expected cash inflows for the month less all the
expected outflows for the month. I prefer to prepare 3 month cash flow budgets as opposed to yearly cash flow budgets which I
found needed updating within a couple of months of preparing them. Any excess cash should be transferred to a high interest
bank account that can be easily accessed when it is needed. See below for an example of a cash flow budget.
Example of a simplified 3 month cash flow budget
July
August
September
Cash Inflows
Sales
$10,000
$7,000
$12,000
Sale of Asset
$2,000
Total Inflows
$10,000
$9,000
$12,000
Cash Outflows
Expenses
$10,000
$10,000
$7,000
Loan Repayments
$1,000
$1,500
$1,500
Total Outflows
$11,000
$11,500
$8,500
Net Cash Flow
-$1,000
-$2,500
$3,500
Cash Balance at beginning of month
$3,000
$2,000
-$500
Cash balance at end of month
$2,000
-$500
$3,000
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