qprev_HBB Manual 2.qxd - Small Business BC

flow. If the flow goes the other way, with moremoney disbursed than received, the business has anegative cash flow. Negative cash flows areshown in brackets like this ($2,315). Cash flowprojections total the value of ALL cash receiptsand ALL cash disbursements for each month in a12-month period.Cash ReceiptsMoney In: cash sales, accounts receivable, loansoutstanding, petty cash. For the cash flowstatement, you need TOTAL CASH RECEIPTS.Cash DisbursementsMoney Out: purchases, salaries, payrolltaxes/benefits, rent, utilities, capital equipmentpurchases, accounts payable, loan payments(interest/principal), owner’s withdrawals ordividends. For cash flow statements, you needTOTAL CASH DISBURSEMENTS.Total Cash Receipts – Total CashDisbursements = Cash BalanceFor the cash flow statement you can drop and adddifferent categories of cash receipts anddisbursements so the format fits your business.To prepare cash flow projections for the first yearof operation, consider how much the business isprobably going to spend in each category, andpencil it in. A cash flow statement for a year is atable with a column for each month and a row foreach cash category, in and out. (See Appendix Kfor a sample Cash Flow Statement). Pencil isrecommended because using cash flow statementsto manage involves comparing these estimateswith actual cash flow.Actual cash flow statements ( not a cash flowprojection, but a record of actual businessfinances) are prepared at the end of each monthof operation. The figure to begin with in anactual cash flow statement is the “beginning cashbalance” – the amount the business starts with atthe beginning of the year being projected. Amonthly beginning cash balance is the startingpoint for each month’s cash flow figures. Afterthe first month, this figure is brought forwardfrom the previous month as the Cash Balance.While the arithmetic is not difficult, you can seewhy getting organized from the beginning is soimportant in a business.To use cash flow projections and statementsto manage finances, compare the first month’sestimates with actual cash flow. Adjustsubsequent months according to what yourcomparison shows. Here’s where you will beglad you used pencil to record estimates. Keepcopies of the original projections, so you have anaccessible record of cash flow estimatesand statements. If you tend to overestimate orunderestimate certain figures (or suffer a cashcrunch at the same time each year), these patternswill be evident in comparisons over several yearsof financial projections with actual statements,particularly for cash flow.solutions for small business home-based business 83