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10 Cash Flow Strategies for a Successful Business by Scott Richards

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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

$7,000

Loan Repayments

$1,000

$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

www.CashFlowStrategies.com.au

www.BeyondtheNumbers.com.au

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