Cash Flow Planning

Cash is the fuel that powers a business. Without cash, the business won’t operate. Without enough cash when the business needs cash, the business will operate sporadically or sluggishly. If there is no cash, the business won’t operate at all. Cash flow is a tool to determine if business changes are feasible, if business changes are viable, and if financial goals can be met. Cash flow is important because it identifies how much cash is needed and when it is needed. Cash flow measures and monitors business activity. It evaluates business strategies and identifies areas for business improvement. Cash flow is also important because it identifies the risks the owner might take and investors/bankers require it.

Cash flow planning describes the movement of cash in and out of the business and specifically addresses the following:

  • Timing- when cash moves in and out
  • Amounts- how much cash moves in and out
  • Sources- where cash comes from
  • Uses- where cash goes
  • Relationships- the relationships of business activity to producing or using cash.

Things to do if cash flow is negative:

  • Invest more money
  • Borrow money
  • Decrease inventory
  • Decrease receivables collection days
  • Increase payment days
  • Reduce uses of cash

Workbook- Section 3: Cash Flow Planning

For more information about any of the sections included in this portion of the workbook click the links below:

Building Baseline Cash Flow
Updating Cash Flow Based on Marketing Plan
Updating Cash Flow Based on Operations Plan
Cash Flow Break-Even Analysis
Cash Flow Sensitivity
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Back to Section 2: Market Planning

Continue to Section 4: Operations Planning