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How to Prepare a Cash Flow Statement

• 07 Dec 2021

Cash flow statements are one of the three fundamental financial statements financial leaders use. Along with income statements and balance sheets, cash flow statements provide crucial financial data that informs organizational decision-making. While all three are important to the assessment of a company’s finances, some business leaders might argue cash flow statements are the most important.

Business owners, managers, and company stakeholders use cash flow statements to better understand their companies’ value and overall health and guide financial decision-making. Regardless of your position, learning how to create and interpret financial statements can empower you to understand your company’s inner workings and contribute to its future success.

Related: The Beginner's Guide to Reading & Understanding Financial Statements

Here’s a look at what a cash flow statement is and how to create one.

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What Is a Cash Flow Statement?

A cash flow statement is a financial report that details how cash entered and left a business during a reporting period .

According to the online course Financial Accounting : “The purpose of the statement of cash flows is to provide a more detailed picture of what happened to a business’s cash during an accounting period.”

Related: How to Read & Understand a Cash Flow Statement

Since cash flow statements provide insight into different areas a business used or received cash during a specific period, they’re important financial statements when it comes to valuing a company and understanding how it operates.

A typical cash flow statement comprises three sections: cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

How to Create a Cash Flow Statement

1. Determine the Starting Balance

The first step in preparing a cash flow statement is determining the starting balance of cash and cash equivalents at the beginning of the reporting period. This value can be found on the income statement of the same accounting period.

The starting cash balance is necessary when leveraging the indirect method of calculating cash flow from operating activities. However, the direct method doesn’t require this information.

2. Calculate Cash Flow from Operating Activities

One you have your starting balance, you need to calculate cash flow from operating activities. This step is crucial because it reveals how much cash a company generated from its operations.

Cash flow from operations are calculated using either the direct or indirect method.

Direct Method

The direct method of calculating cash flow from operating activities is a straightforward process that involves taking all the cash collections from operations and subtracting all the cash disbursements from operations. This approach lists all the transactions that resulted in cash paid or received during the reporting period.

Indirect Method

The indirect method of calculating cash flow from operating activities requires you to start with net income from the income statement (see step one above) and make adjustments to “undo” the impact of the accruals made during the reporting period. Some of the most common and consistent adjustments include depreciation and amortization.

Related: Financial Terminology: 20 Financial Terms to Know

Both the direct and indirect methods will result in the same number, but the process of calculating cash flow from operations differs.

While the direct method is easier to understand, it’s more time-consuming because it requires accounting for every transaction that took place during the reporting period. Most companies prefer the indirect method because it's faster and closely linked to the balance sheet. However, both methods are accepted by Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

Related: GAAP vs. IFRS: What Are the Key Differences and Which Should You Use?

3. Calculate Cash Flow from Investing Activities

After calculating cash flows from operating activities, you need to calculate cash flows from investing activities. This section of the cash flow statement details cash flows related to the buying and selling of long-term assets like property, facilities, and equipment. Keep in mind that this section only includes investing activities involving free cash, not debt.

4. Calculate Cash Flow from Financing Activity

The third section of the cash flow statement examines cash inflows and outflows related to financing activities. This includes cash flows from both debt and equity financing—cash flows associated with raising cash and paying back debts to investors and creditors.

When using GAAP, this section also includes dividends paid, which may be included in the operating section when using IFRS standards. Interest paid is included in the operating section under GAAP, but sometimes in the financing section under IFRS as well.

5. Determine the Ending Balance

Once cash flows generated from the three main types of business activities are accounted for, you can determine the ending balance of cash and cash equivalents at the close of the reporting period.

The change in net cash for the period is equal to the sum of cash flows from operating, investing, and financing activities. This value shows the total amount of cash a company gained or lost during the reporting period. A positive net cash flow indicates a company had more cash flowing into it than out of it, while a negative net cash flow indicates it spent more than it earned.

Cash Flow Statement Example

To help visualize each section of the cash flow statement, here’s an example of a fictional company generated using the indirect method.

Go to the alternative version .

This cash flow statement is for a reporting period that ended on Sept. 28, 2019. As you'll notice at the top of the statement, the opening balance of cash and cash equivalents was approximately $10.7 billion.

During the reporting period, operating activities generated a total of $53.7 billion. The investing activities section shows the business used a total of $33.8 billion in transactions related to investments. The financing activities section shows a total of $16.3 billion was spent on activities related to debt and equity financing.

At the bottom of the cash flow statement, the three sections are summed to total a $3.5 billion increase in cash and cash equivalents over the course of the reporting period. Therefore, the final balance of cash and cash equivalents at the end of the year equals $14.3 billion.

Financial Decision-Making

Whether you’re a manager, entrepreneur, or individual contributor, understanding how to create and leverage financial statements is essential for making sound business decisions.

The statement of cash flows is one of the most important financial reports to understand because it provides detailed insights into how a company spends and makes its cash. By learning how to create and analyze cash flow statements, you can make better, more informed decisions, regardless of your position.

Are you interested in gaining a toolkit for making smarter financial decisions and the confidence to clearly communicate them to key stakeholders? Explore Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —to discover how you can unlock critical insights into your organization’s performance and potential. Not sure which course is right for you? Download our free flowchart .

Data Tables

Company a - statement of cash flows (alternative version).

Year Ended September 28, 2019 (In millions)

Cash and cash equivalents, beginning of the year: $10,746

OPERATING ACTIVITIES

Investing activities, financing activities.

Increase / Decrease in Cash and Cash Equivalents: 3,513

Cash and Cash Equivalents, End of Year: $14,259

Go back to the article .

About the Author

Cash Flow Basics for Small Business Explained

Noah Parsons

13 min. read

Updated January 4, 2024

Cash is the lifeblood of every business, and running out of it is the number one reason that small businesses fail. Even if you are making plenty of sales, if you don’t have enough cash in the bank your business won’t be able to pay its bills and stay open.

That’s why it’s so important for businesses to understand the basics of cash flow and cash flow forecasting. We’ll be covering those elements and more throughout this guide.

• What is cash flow?

Cash flow measures how much money moves into and out of your business during a specific period.

Businesses bring in money through sales, returns on investments, and loans and investments—that’s cash flowing into the business.

And businesses spend money on supplies and services, utilities, taxes, loan payments, and other bills—that’s cash flowing out.

Cash flow is measured by comparing how much money flows into a business during a certain period to how much money flows out of that business during that period. 

You usually measure cash flow over a month or a quarter.

• How to calculate cash flow

The simplest formula for calculating cash flow is:

CASH RECEIVED – CASH SPENT = NET CASH FLOW

If your net cash flow number is positive, your business is cash flow positive, and accumulating cash in the bank.

If your net cash flow number is negative, your business is cash flow negative, and you are finishing the month with less cash than you started with.

What’s the difference between Cash and Profit?

Believe it or not, it’s possible for your business to be profitable but still run out of cash. That may not be intuitive initially, but it’s because cash and profits are very different. Here’s why.

Profits can include sales you’ve made but haven’t been paid for yet.

Cash, on the other hand, is the amount of money you actually have in your bank account. It represents your business’s liquidity; it’s not cash if you can’t use it right now to pay your bills.

For example, if you’re making a lot of sales but you invoice your customers, and they pay you “net 30,” or within 30 days of receiving the invoice, you could have lots of revenue on paper but not a lot of cash in your bank account because your customers haven’t paid you yet. Those sales will only show up on your income statement .

If the money your customers owe you hasn’t entered your bank account, it won’t appear on your cash flow statement yet. It isn’t available to your business at this point. It’s still in your customers’ hands, even though you’ve invoiced them. You keep track of the money your customers owe you in accounts receivable .

Meanwhile, you can only pay your bills with real cash in your bank account. It will be tough to fulfill orders, meet payroll, and pay rent without that cash. That’s why keeping track of cash flow is so important. 

To keep your business afloat, you need to have a good sense of what comes in and what goes out of your business every month and do everything you can to remain cash flow positive.

Dig deeper:

The difference between cash and profits

Learn more about the specific differences between cash and profits and how they impact your business.

The difference between cash flow and working capital

Cash flow and working capital tell different financial stories about your business. Cash flow deals with money moving in and out of your business while working capital compares assets and liabilities.

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• How to analyze a cash flow statement

When analyzing your historical cash flow statement, you’re looking at the amount of real cash you have on hand at the beginning of the month, compared to your cash at the end of the month. 

You can also look at your cash flow over different time frames – quarterly, for example – but a good rule of thumb is to regularly look at your cash flow to better understand any changes in the health of your business.

To see a visual example of how this works within a business, you can download this free cash flow example as a PDF or Excel sheet .

When conducting a cash flow analysis, you’ll want to be sure you understand the following key terms. 

Positive cash flow

Positive cash flow is defined as ending up with more liquid money on hand at the end of a given period of time compared to what was available when that period began.

Let’s say you started with $1000 in cash at the beginning of the month. You paid $500 in bills and expenses, and your customers paid you $2,000 for your services. Good news: Your cash flow is positive, at $1,500 for the month, leaving you with $2500 in cash.

If you have positive trending cash flow, it’s easier to:

• Pay your bills: Positive cash flow ensures employees get checks during each payroll cycle. It also gives decision makers the funds they need to pay suppliers, creditors, and the government.
• Invest in new opportunities: Today’s business world moves quickly. When cash is readily available, business owners can invest in opportunities that may arise at any given point in time.
• Stomach the unpredictable: Having access to cash means that whenever equipment breaks, clients don’t pay their invoices on time, or when new government regulations come into effect, businesses can survive.

Negative cash flow

Negative cash flow is when more cash is leaving the business than is coming in. When cash flow is negative, the amount of cash in your bank account is shrinking. This might not be a problem if your business has plenty of cash in the bank. But, it does mean that your business will eventually run out of money if it doesn’t become cash flow positive at some point.

Let’s say you started with $2,000 in the bank at the beginning of the month. You paid $1,500 in bills and expenses, and even though you did plenty of work and invoiced your customers for $3,000 worth of services, your customers only actually paid you $200. You’re still waiting for the rest of your payments to come in. Your cash flow is negative: -$1,300 for the month, leaving you with only $700 in cash.

If you don’t have any reserves, your rent check might bounce. If you have an established line of credit, you might rely on that to pay part of your bills. Maybe you forecasted your cash flow and knew that you were going to be short that month, so you made a plan to cover your expenses.

One month of negative cash flow won’t necessarily tank your business. But your business is at risk when you start to see a trend, and you don’t do nothing to reverse it (or when you’re unpleasantly surprised because you haven’t been tracking your cash flow). 

Cash Burn Rate and Runway

New businesses and startups often have negative cash flow when starting. They have lots of bills to pay while they’re getting up and running, and there aren’t a lot of sales yet. As revenue from sales starts to come in, hopefully, cash will flow into the business instead of just flowing out. 

This is why new businesses often need investment and loans to get started—they need cash in the bank to cover all of the negative cash flow during the business’s early days.

When starting out, it’s important to track Cash Burn Rate, which is essentially your negative cash flow number – the amount of money you are “burning” each month. You can then use that number to determine how many months of cash you have left – this is your “runway.” 

Read our detailed explanation of cash burn rate and cash runway to learn more about how to find, measure, and adjust these metrics.

Negative cash flow can also happen when a business chooses to invest in a new opportunity. The business could be betting that investing in a new opportunity now will pay off in the future. That investment could cause negative cash flow for some time, so it’s important to keep a close eye on cash and have a solid cash flow forecast in place so you know if your business is on track to stay in the black.

How positive and negative cash flow impact your business

Learn more about your relationship with positive and negative cash flow and how understanding these concepts will help you better understand your business health.

The importance of your burn rate and cash runway

Learn to calculate how much cash you’re using up and how long you have until it’s depleted.

15 tips for dealing with clients who won’t pay

A major factor that impacts your positive cash flow is clients paying on time. If delays in payment are leading to a cash flow crunch, there are a few things worth trying.

• Why cash flow forecasting is important

You’ll want to monitor your historical cash flow at least once a month so you can start spotting trends with what’s actually happening with your cash inflow and outflow.

But it’s not just measuring the past and present, forecasting your cash flow can also help you anticipate when your business might run low on cash in the future. You can then plan ahead and open a line of credit or find other loans and investments to help you cover that point in the future when you’re going to need a little extra cash.

It’s a lot easier to get help from a bank or investor before you’re actually in a crisis where you’re not sure you can cover your bills. If you wait until you’re really in trouble to take action, lenders may see you as too much of a risk and turn down your request.

Your cash flow forecast can also help you plan the best time to make a big purchase, like a new piece of equipment or a company vehicle.

Don’t forget to account for the unknown, though. Business owners can’t predict the future—particularly when it comes to any unforeseen expenses they might incur (e.g., a truck breaking down prematurely and needing replacement, or a data breach resulting in a forced increase in IT spend). And they also can’t know for certain that their clients will pay their bills on time.

So, when you’re forecasting or looking at your cash flow statement for last month, remember that having some buffer is a good thing. You don’t want to be in a position where you’ve allocated every single penny, to the point where you can’t accommodate unexpected expenses.

Part of reviewing your cash flow should be thinking about risk, and the effect an unexpected expense will have on your available cash—and ultimately, your ability to pay your bills.

How to forecast your cash flow and build a cash flow statement

A cash flow projection is all about predicting your money needs in advance. 

Unfortunately, though, forecasting your cash flow is a bit more complicated than forecasting other aspects of your business such as your sales and expenses. Your cash flow statement takes inputs from your revenue projections, your expense projections, and also your inventory purchase plans if your business keeps inventory on hand.

In addition to that, you need to predict when your customers will pay you – will all of them pay on time? Or will some take longer to pay?

A tool like LivePlan can greatly simplify cash flow forecasting, but you can also do it yourself with spreadsheets.

There are two methods you can use to build a cash flow statement : the direct method and the indirect method. While they will both arrive at the same end-result and predict how much cash you will have in the bank in the future, they accomplish that goal in different ways.

The direct method of forecasting cash flow

The direct method provides a very clear view of how cash moves in and out of a business. You essentially add up all the cash your business has received from various sources and then subtract all the cash that is paid out to suppliers, vendors, employees, etc. 

This number will be the amount of cash you’ve added or subtracted from your bank account during the month.

The indirect method of forecasting cash flow

The indirect method starts with your net income from your Profit and Loss Statement and then makes adjustments to that number to account for non-cash expenses such as depreciation. 

From there you make adjustments to account for changes in inventory, accounts receivable , and accounts payable .

The indirect method is very common for building historical cash flow statements because the required numbers are all easily generated from your accounting system. This makes it a fairly popular method for forecasting cash flow. 

However, the direct method is generally easier for people who aren’t as familiar with the intricacies of accounting.

Read our guide for a more detailed explanation of the two methods of creating a cash flow statement .

Forecasting cash flow

If you’re forecasting cash flow using spreadsheets, I recommend using the direct method. It’s easier and more straightforward.

Essentially, you want to create future estimates of when you’ll receive money from customers and when you’ll pay your bills. 

It’s not critical to forecast every invoice and bill payment, though. Forecasting is about helping you make strategic decisions about your business, so making broader estimates in your forecast is OK.

How to manage cash flow with an accurate forecast

Learn how to leverage your cash flow forecast to actively manage your business and improve your chances for growth.

• How to improve your cash flow

If your cash flow is negative or you’re just looking for ways to improve your cash flow in general, there are plenty of options available. Here’s a quick list of things you can do:

• Convince your customers to pay you faster
• Pay your own bills a bit slower
• Purchase less inventory and keep less inventory on hand
• Follow up on bad debts
• Establish a line of credit or other type of business loan

Depending on your situation, you may use these methods or even consider more drastic measures if the broader economy is impacting your ability to create positive cash flow.

Tips to improve your cash flow

Are you struggling to maintain healthy cash flow? Check out these ten tips to improve the health of your business.

How to prevent cash flow problems

The best way to improve your cash flow is by preventing problems before they ever start. Here are four ways to do it.

How to manage cash flow in a crisis

Here are five tips to help strengthen your cash position and keep your business healthy even when dealing with terrible circumstances.

How to balance cash flow in a seasonal business

Seasonal businesses have unique challenges you’ll want to consider, including variations on cash flow management. Check out these techniques to effectively balance your cash flow and avoid seasonal surprises.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Cash vs profit
• How to forecast cash flow

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Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

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In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

• Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
• Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
• Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
• Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
• Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
• Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
• Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

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• Write Your Business Plan | Part 1 Overview Video
• The Basics of Writing a Business Plan
• How to Use Your Business Plan Most Effectively
• 12 Reasons You Need a Business Plan
• The Main Objectives of a Business Plan
• What to Include and Not Include in a Successful Business Plan
• The Top 4 Types of Business Plans
• A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
• 6 Tips for Making a Winning Business Presentation
• 12 Ways to Set Realistic Business Goals and Objectives
• 3 Key Things You Need to Know About Financing Your Business
• How to Perfectly Pitch Your Business Plan in 10 Minutes
• How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
• How to Fund Your Business Using Banks and Credit Unions
• How to Fund Your Business With an SBA Loan
• How to Fund Your Business With Bonds and Indirect Funding Sources
• How to Fund Your Business With Venture Capital
• How to Fund Your Business With Angel Investors
• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

How to Make a Cash Flow Statement Use this sheet to keep track of the money coming in and going out of your business.

By Eric Butow • Oct 27, 2023

Key Takeaways

• What makes up a cash flow statement
• The difference between profits and cash on hand

Opinions expressed by Entrepreneur contributors are their own.

This is part 4 / 11 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.

The cash flow statement monitors the flow of cash over a period of time (a year, a quarter, a month) and shows you how much cash you have on hand at the moment.

The cash flow statement, also called the statement of changes in financial position, probes and analyzes changes that have occurred on the balance sheet. It's different from the income statement, which describes sales and profits but doesn't necessarily tell you where your cash came from or how it's being used.

Related: How to Write an Income Statement for Your Business Plan

A cash flow statement consists of two parts. One follows the flow of cash into and out of the company. The other shows how the funds were spent. The two parts are called, respectively, sources of funds and uses of funds. At the bottom is, naturally, the bottom line, called net changes in cash position. It shows whether you improved your cash position and by how much during the period.

You Can Be Profitable and Cash Poor at the Same Time

Noah Parsons writes in 5 Tips for More Accurate and Useful Cash Flow Forecasts : "Remember, profits aren't the same as cash. Profitable companies can run out of cash, and they frequently do because of poor cash flow planning. Here's a very quick explanation of why this occurs:

When your business makes a sale to a customer, but that customer takes 30 or even 60 days to pay their bill, the amount of the sale does show up on the Profit and Loss Statement (also called a P&L or income statement), potentially increasing your profits. But that cash doesn't show up in your bank account until the customer actually pays you. So, your business could make a lot of sales and be profitable, but at the same time be low on cash because customers haven't actually paid for their products or services yet."

Related: How to Make Realistic Financial Forecasts

Sources of Funds

Sources of funds usually has two main sections in it. The first shows cash from sales or other operations. In the cash flow statement, this figure represents all the money you collected from accounts during this period. It may include all the sales you booked during the period, plus some collections on sales that actually closed earlier.

Related: 4 Crucial Signs That Your Small Business Needs Funding

The other category of sources of funds includes interest income, if any, plus the proceeds from any loans, line of credit drawdowns, or capital received from investors during the period. Again, these figures represent money actually received during the period. If you arranged for a $100,000 line of credit but only used $10,000 during this period, your sources of funds would show $10,000.

Uses of Funds

The sources of funds section often has only a few entries, although some cash statements break out sources of funds by businesses and product lines. But even simple statements show several uses of funds. A cash flow statement will normally show uses such as cost of goods sold; sales, general, and administrative expense (SG&A); and any equipment purchases, interest payments, payments on principal amounts of loans, and dividends or draws taken by the owners.

Related: 80% of Businesses Fail Due To a Lack of Cash. Here are 4 Reasons Why Cash Flow Forecasting Is So Important

Net Change in Cash

Few things feel better for a startup businessperson than having plenty of cash in the bank. And few things offer a better picture of what's going on with cash on hand than the net change in cash line on your business plan. Net change in cash equals the difference between total funds in and total funds out. If you bring in $1 million and send out $900,000, your net change in cash is $100,000. Ideally, you want this number to be positive and, if possible, showing an upward trend.

The Problem With Too Much Cash

Is it possible to have too much cash? In fact, it is. If your cash is simply sitting in a bank account, it may be drawing little or no interest. In a typical inflationary environment, it will often lose purchasing power from one day to the next. If you have large amounts of cash and nothing to do with it, consider reinvesting in your company—or perhaps another.

Related: How to Use Your Business Plan to Track Performance

Other Financial Information

If you're seeking investors for your company, you'll probably need to provide quite a bit more financial information than what is in the income statement, balance sheet, and cash flow statement. For instance, a personal finance statement may be needed if you're guaranteeing loans yourself. Applying business data to other ratios and formulas will yield important information on what your profit margin is and what level of sales it will take for you to reach profitability. Still other figures, such as the various ratios, will help predict whether you'll be able to pay your bills for long. These bits of information are helpful to you as well as to investors, it should be noted. Understanding and, if possible, mastering them will help you run your business more smoothly.

Related: How to Use Financial Ratios to Understand the Health of Your Business

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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Planning, Startups, Stories

Tim berry on business planning, starting and growing your business, and having a life in the meantime., standard business plan financials: how to project cash flow.

No matter what your business planning objectives, cash flow is still the most vital resource in the business, and managing cash is the single most important business function. Without cash, you go under. So I always assume cash flow is included in every kind of real business plan. And it is the most important component of standard business plan financials. This is another of my series on standard business plan financials .

(Important: If you’re using LivePlan, life gets a lot easier for you. Please read LivePlan Cash Flow instead of this post. )

The Projected Cash Flow is what links the other two of the three essential projections, the Projected Profit and Loss and Projected Balance Sheet, together. The cash flow completes the system. It reconciles the Profit and Loss with the Balance.

Experts can be annoying. There are several ways to do a cash flow plan. Sometimes it seems like as soon as you use one method, somebody who is supposed to know tells you you’ve done it wrong. Often that means that expert doesn’t know enough to realize there is more than one way to do it.  I’m doing direct cash flow for this post. I may do indirect in a later post.

Direct Cash Flow

So here is a direct cash flow plan. You can see the potential complications and the need for linking up the numbers from the other statements. Your estimated receipts from accounts receivable must have a logical relationship to sales and the balance of accounts receivable. Likewise, your payments of accounts payable have to relate to the balances of payables and the costs and expenses that created the payables. Vital as this is to business survival, it is not nearly as intuitive as the sales forecast, personnel plan, or income statement. The mathematics and the financial projections are more complex.

Here’s a sample Projected Cash Flow for a bicycle shop, so you can see how that works:

Estimating Receipts from Receivables

The first two rows of Garrett’s cash flow projection depend on detailed estimates of money coming in as his customers on account pay their invoices. To estimate that, he lays out his guess based on the assumption that only 10% of his sales are on credit (on account), and that his customers pay their invoices in about one month on average. That estimate looks like this:

In this case, the sales on credit are 10% of the estimated total sales in the Sales Forecast, $26,630. That’s the result of Garrett’s assumption, based on the nature of his business. And the money involved comes in one month later. This worksheet projects the Accounts Receivable value in Garrett’s Projected Balance Sheet, as well as the Received from AR value in the Projected Cash Flow. The receivables analysis depends on information in the Profit and Loss Projection, plus an assumption about Sales on Credit, and another on waiting time before payment. And it affects the Projected Balance and the Projected Cash Flow, as shown in this next illustration:

Estimating the Impact of Inventory

Inventory presents another set of important cash-related assumptions. I explained earlier that in the case of inventory, proper accounting practices require special details. The cost of inventory that shows up in the Projected Profit and Loss is related to timing of sales. The actual cash flow implications of inventory depend on when new inventory is purchased, as shown here:

As with Accounts Receivable in the previous illustration, the inventory analysis depends on information from the Sales Forecast, and it sends information to both the Projected Balance Sheet (Ending Inventory) and the Projected Cash Flow (Inventory Purchase).

Estimating the Impact of Payables

Most businesses wait a month or so before they pay invoices for goods and services received from other businesses. That means we can save on our cash flow by holding back some money and paying it later. With proper accrual accounting, that money is recorded on the Balance Sheet as Accounts Payable. Estimating Accounts Payable takes a careful combination of calculations and assumptions. First we have to collect the full amount of payments. Then we account for payments made immediately, not held in Accounts Payable. After that, we estimate how long, on average, we hold payments. That analysis is shown below:

In this case, it is assumed that the store will pay its bills about a month after it receives them.

Cash Flow is About Management

Reminder: you should know how to project cash flow using competent educated guesses based on an understanding of the flow in your business of sales, sales on credit, receivables, inventory, and payables. These are useful projections. But real management is minding the projections every month with plan vs. actual analysis so you can catch changes in time to manage them. The illustration here shows projected profits for the bicycle store compared to the projected cash flow, using the projections presented in this chapter:

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• Example of a cashflow
• Business Finance
• Business plans and cashflow
• Back to Business plans and cashflow
• Writing your business plan
• Example of a business plan

As well as your business plan, a set of financial statements detailing you cashflow is essential. This will provide details of actual cash required by your business on a day-to-day, month-to-month and year-to-year basis.

The needs of a business constantly change and your cashflow will highlight any shortfalls in cash that will need to be bridged. Many established, viable, and even profitable businesses fail due to cash not being available when they need it most.

Good cashflow management is critical to running a successful business. You must be able to pay your bills while you await payment from your customers. There are many well-documented cases of businesses failing not because they weren't profitable but due to poor cashflow management.

You're in business to make a profit. It's a simple principle, but one that can occasionally become lost amid dreams of building multinational empires worth millions of pounds. You won't be able to stay in business, however, unless you have cash, hence the famous adage 'cash is king'.

There will probably be a time lag between your business providing its goods or services and getting paid. This means you have to make sure there is sufficient cash in your company's bank account for it to pay all its bills in the meantime – whether these relate to invoices from suppliers, employees' wages, rent, rates, tax, VAT or anything else.

Even if your business is profitable, there may be times when you are short of cash because you are awaiting payment for a large order. This is likely to be a particular problem during your first year when you are building up your business and don't have regular cash inflows.

The general principle of cashflow management is that you should speed up your cash inflows (customer payments, interest from bank accounts etc) and slow down your cash outflows within reason (purchase of stock and equipment, loan repayments and tax charges etc) as much as possible.

It can be difficult to affect your outflows other than extending your credit terms with your suppliers, which will often occur on fixed dates in the month and your employees and suppliers might also not take too kindly to you delaying payment to them. But there is more scope for you to improve your cash inflows.

This could mean billing regularly, chasing bad debt, selling your debt to a third party (factoring), negotiating extended credit terms with suppliers, managing your stock effectively (which could entail ordering little and often) and giving your customers 30-day payment terms.

Also, as businesses naturally have peaks and troughs, it is important that you put money away during the peaks so that you can dip into it during the troughs.

It is a good idea to think about investing in some accounting software to help you manage your cashflow. There are many software providers: an internet search should reveal the most common. Most provide software that can help you with cashflow analysis and forecasting, so that your business is never caught short of cash in the bank. Your accountant should be able to help advise you on which software package to buy.

How to use the cashflow forecast template

Our cashflow template will show you how a cashflow works and should be amended to suit your own business.

All figures to be entered are actual cash. This includes bank payments and receipts, cheques, bank transfers, cash payments and receipts – all of these should be included in your opening balance.  

Then complete the shaded area opening balance, which includes bank, loan and cash balances and should be put in the sheets:

• monthly cashflow forecast
• monthly actual cashflow

This provides the starting point for the rest of the cashflow. Next, input your month 1 forecast – all the sales broken down into the elements of your particular business – and do the same for expenditure. Base your figures on your own experience and what you forecast to receive or pay. The sections can be amended to reflect your business's requirements.

Repeat this process for the actual cashflow; here the figures you input are based on actual. This should then automatically be displayed in the third sheet:

• monthly cashflow forecast/actual comparison

This is where the real analysis work is done and will determine the accuracy of your forecast figures. The forecasts sheet should be used to determine when you may have a cash shortfall before the event arises and will help determine whether you will need to obtain additional funding.

Download the cashflow template from 'Related documents'.

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ACCA Cashflow Template

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Cash Flow Forecasting: A How-To Guide (With Templates)

Janet Berry-Johnson, CPA

Reviewed by

May 30, 2023

This article is Tax Professional approved

Most small business owners just want their accounting done so they can focus on doing what they love. But tracking and forecasting cash flow—despite the time and effort required—is essential for starting, operating, and expanding a business.

I am the text that will be copied.

In 2018, CB Insights analyzed 101 failed startups and found that running out of cash was the second most common cause of failure, impacting 29% of businesses.

To avoid that fate, you need a cash flow forecast to help you estimate how much your cash outflows and inflows will affect your business.

What is a cash flow forecast?

A cash flow forecast (also known as a cash flow projection) is like a budget, but rather than estimating revenues and expenses, it estimates cash coming in and going out based on past business performance.

It’s not uncommon for a business to experience a cash shortage, even when sales are good. This usually happens when customers are allowed to pay after the product or service is delivered. In cases like these, a business owner must plan how they will cover costs before receiving the payment.

For example, say Hana Enterprises ships $50,000 worth of security products to customers in January, along with invoices that are due in 30 days. The company will have $50,000 of revenues for the month but won’t receive any cash until February. On paper, the business looks healthy, but all of its sales are tied up in the accounts receivable. Unless Hana Enterprises has plenty of cash on hand at the beginning of the month, they will have trouble covering their expenditures until they start receiving cash from clients.

With a cash flow forecast, you ignore sales on credit, accounts payable, and accrued expenses, instead focusing on the revenue you actually expect to collect and the expenses you actually expect to pay during a given period. You can also use the information provided on past cash flow statements to estimate your expenses for the period you’re forecasting for.

( If you just want to dive into cash flow forecasting, check out our free cash flow forecast template . )

The benefits of cash forecasting

Cash forecasting may sound like something boring that accountants do in big companies. Not so! It’s absolutely essential for every single business. Here’s why:

• It helps you identify potential problems. Cash forecasting can help you predict the months in which you’re likely to experience a cash deficit and make necessary changes, like changing your pricing or adjusting your business plan.
• It decreases the impact of cash shortages. When you can predict months in which you might experience a cash shortage, you can take steps to plan for them. You might save more in months where you have a surplus, step up your receivables collection efforts, or establish a line of credit with your bank to guarantee enough working capital to last the period.
• It keeps suppliers and employees happy. Late payments and missing paychecks damage your reputation with suppliers and employees. When you can predict how much money you’ll have on hand in any given month, you can confirm that you’ll be able to meet your payroll obligations and pay suppliers by the due date.

Free cash flow forecast template

To make this a lot easier, we’ve created a business cash flow forecast template for Excel you can start using right now.

Access Template

The template has three essential pieces:

• Beginning cash balance. This is the actual cash you expect to have on hand at the beginning of the month. It should include bank accounts, PayPal, Venmo, anything you use that’s currently holding just business funds. This information can be found on your balance sheet .
• Sources of cash. These are all of your cash inflows each month. It can include cash sales, receivables collections, repayments from money you’ve loaned out, etc.
• Uses of cash. This is every expense your business may incur, including payroll, payments to vendors, utilities, rent, loan payments, etc.

Here’s an example of a completed cash flow projection for a three month period:

Hana Enterprises, Inc.

Cash Flow Projection

January to March 2022

As you can see from the example above, Hana Enterprises expects to have a cash shortage in March. This results from a negative net cash flow (when more cash goes out than comes in). Knowing that information ahead of time, the company can take steps to prevent the shortage from occurring.

Hana Enterprises has several options to avoid this shortage in March. They might secure a line of credit from the bank, purchase fewer computers in February, negotiate longer payment terms from vendors, contact late-paying customers to speed up the collection of receivables, or take other cost-cutting measures to reduce their overhead expenses.

When you’re ready to get started, download your copy of the cash flow forecasting sheet here .

How Bench can help

Use Bench’s simple, intuitive platform to get all the information you need to project your cash flow. Each month, your transactions are automatically imported into our platform then categorized and reviewed by your personal bookkeeper. Bench helps you stay on top of your business’s top expenses so you can make informed budgeting decisions on the fly. Explore our platform with a free tour today .

Tips for improving your cash flow spreadsheet

Keep in mind: a cash flow forecast isn’t something you create once a year and never look at again. It’s a living, breathing business tool you should review and update on a monthly basis.

Though projections are helpful, they can’t perfectly predict the future. As the months pass, you should expect to see that your projections aren’t quite matching up with your actual results. That means it’s time to re-run your forecast to take into account these differences.

To improve the accuracy of your cash flow worksheet, consider the following:

• Account for extra pay periods. If you pay employees bi-weekly, make sure your projection takes into account any months with three payrolls.
• Remember annual payments. If certain insurance policies, subscriptions, or other expenses are paid annually rather than monthly, be sure to include them in your spreadsheet.
• Remember estimated tax payments. For most calendar-year businesses, estimated tax payments are due on April 15th, June 15th, September 15th, and January 15th.
• Don’t forget about savings. Try to allocate a portion of any cash surpluses to save for lean months.
• Identify seasonal fluctuations. If you’re expecting a period of time with lower sales, make sure your forecast reflects this so you can have enough cash on hand to ramp up when business picks up again.
• Don’t forecast too far out. Creating a rolling 12-month cash flow forecast that you update at the end of each month can help you identify issues before your business faces financial troubles, but don’t try to forecast more than 12 months out. The longer the reporting period you want to forecast, the more likely you’ll end up spending a lot of time creating a cash flow projection that doesn’t provide any useful information.

Your cash flow forecast is key to good cash flow management . Try to account for all cash sources and uses in your projection and maintain an emergency fund or backup plan to ensure you don’t get sidelined by slow-paying customers or unexpected expenses. When you do, this simple but valuable tool can help you keep an eye on cash and ensure you don’t compromise growth or put your business in jeopardy.

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How to create a cash flow projection (and why you should)

For small business owners, managing cash flow (the money going into and out of your business) can be the difference between a thriving, successful company and filing for chapter 11 (aka bankruptcy).

In fact, one study showed that 30% of businesses fail because the owner runs out of money, and 60% of small business owners don’t feel knowledgeable about accounting or finance .

Understanding and predicting the flow of money in and out of your business, however, can help entrepreneurs make smarter decisions, plan ahead, and ultimately avoid an unnecessary cash flow crisis.

After all, knowing whether the next month will see a financial feast or famine can help you make better decisions about spending, saving, and investing in your business today.

One way to do this (without hiring a psychic)? Cash flow projection.

What is cash flow projection?

Cash flow projection is a breakdown of the money that is expected to come in and out of your business. This includes calculating your income and all of your expenses, which will give your business a clear idea on how much cash you'll be left with over a specific period of time.

If, for example, your cash flow projection suggests you’re going to have higher than normal costs and lower than normal earnings, it might not be the best time to buy that new piece of equipment.

On the other hand, if your cash flow projection suggests a surplus , it might be the right time to invest in the business.

Cash flow projections: The basics

In order to properly create a cash flow forecast, there are two concepts you should be aware of: accounts receivable (cash in) and accounts payable (cash out)

• Accounts Receivable: refers to the money the business is expecting to collect, such as customer payments and deposits, but it also includes government grants , rebates, and even bank loans and lines of credit .
• Accounts Payable: refers to the exact opposite—that is, anything the business will need to spend money on. That includes payroll , taxes, payments to suppliers and vendors, rent, overhead, inventory, as well as the owner’s compensation.

A cash flow projection (also referred to as a cash flow forecast) is essentially a breakdown of expected receivables versus payables. It ultimately provides an overview of how much cash the business is expected to have on hand at the end of each month .

Cash flow projections typically take less than an hour to produce but can go a long way in helping entrepreneurs identify and prepare for a potential shortfall, and make smarter choices when running their business.

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How to calculate your cash flow projection

Calculating your cash flow projection can seem intimidating at first, but once you start pulling together the necessary information, it isn’t so scary. Let’s walk through the first steps together.

1. Gather your documents

This includes data about your business’s income and expenses.

2. Find your opening balance

Your opening balance is the balance in your bank at the start of a period. (So, if you’ve just started your business, this is zero.)

Your closing balance is the amount in your bank at the end of the period.

So the opening balance in one month should equal the closing balance at the end of the previous month. But more on this later.

3. Receivables (money received/cash in) for next period

This is an estimate of your anticipated sales (such as invoices you expect to be paid, or payments made on credit), revenue, grants , or loans and investments.

4. Payables (money spent/cash out) for next period

Again, this is an estimate. You should consider things like materials, rent, taxes, utilities, insurance, bills, marketing, payroll, and any one-time or seasonal expenses.

“Seasonality can have a material effect on the cash flow of your business,” Andy Bailey, CEO of Petra Coach, wrote in an article for Forbes . “A good cash flow forecast will anticipate when cash outlays and cash receipts are higher or lower so you can better manage the working capital needs of the company.”

5. Calculate cash flow

Now, let’s bring it all together using this cash flow formula : Cash Flow = Estimated Cash In – Estimated Cash Out

6. Add cash flow to opening balance

Now, you’ll want to add your cash flow to your opening balance, which will provide you with your closing balance.

Put it all together: How a cash flow projections look on paper

In practical terms, a cash flow projection chart includes 12 months laid out across the top of a graph, and a column on the left-hand side with a list of both payables and receivables.

Here are all the categories you’ll need for your cash flow projection:

• Opening balance/operating cash
• Money received (cash sales, payments, loans, investments, etc.
• Money spent (expenses, materials, marketing, payroll and taxes, bills, loans, etc.)
• Totals for money received and money spent, respectively
• Total cash flow for the period
• Closing balance

This column typically begins with “operating cash”/opening balance or unused earnings from the previous month. For example, if your cash flow projection for January suggests a surplus of $5,000, your operating cash for February is also $5,000.

Below operating cash, list all expected accounts receivable sources—such as sales, loans, or grants—leaving a space at the bottom to add them all up.

Next, list all potential payable items—such as payroll, overhead, taxes, and inventory—with another space to add their total below.

Once you have your numbers prepared, simply subtract the total funds that are likely to be spent from the cash that is likely to be received to arrive at the month’s cash flow projection.

Once you’ve calculated your monthly cash flow, take the final number and list it at the top of the next month’s column under operating cash, and repeat the process until you’ve got a forecast for the next 12 months.

After the end of each month, be sure to update the projection accordingly, and add another month to the projection.

If you’re a Wave customer and you prefer to use a ready-made chart to help you create your projection, you can pull your financial data from the Reports section of Wave and feed it into this cash flow forecast template .

Be realistic with your cash flow forecast

Cash flow projections are only as strong as the numbers behind them, so it’s important to be as realistic as possible when putting yours together.

For example, being overly generous in your sales estimates can compromise the accuracy of the projection.

Furthermore, if you provide customers with a 30-day payment schedule and a majority pay on the last possible day, make sure that cycle is accurately reflected in your projection.

On the payables side of the equation, try to anticipate annual and quarterly bills and plan for an increased tax rate if the business is likely to reach a new tax level.

Those who pay their staff on a bi-weekly basis also need to keep an eye out for months with three payroll cycles, which typically occurs twice each year.

“Monthly or quarterly forecasts generally are more useful for stable, established businesses,” Bailey also wrote . “Weekly projections will be essential for companies scaling up or going through significant changes, such as a restructuring or merger/acquisition.”

“We like to encourage business owners—especially those who are starting out—to create a 13-week forecast for cash,” William Lieberman, the Managing Partner of The CEO’s Right Hand, told Forbes . “Each week, update the forecast based on what happened the previous week and extend the forecast window by one more week. In this way, you can keep a close watch on exactly what’s coming in and going out so you can be more proactive in addressing potential cash crunches.”

Those who want to be extra cautious with their projections can even include an “other expenses” category that designates a certain percentage of revenues for unanticipated costs. Putting aside some extra cash as a buffer is especially useful for those building their first projections, just in case they accidentally leave something out.

What now: Use your cash flow forecast to make data-driven decisions

Building the cash flow projection chart itself is an important exercise, but it’s only as useful as the insights you take away from it. Instead of hiding it away for the remainder of the month, consult your cash flow projection when making important financial decisions about your business.

If, for example, you anticipate a deficit in the months ahead, consider ways to cut your costs , increase sales, or save surpluses to help make up the difference. If you notice that payments often come in late, consider introducing a late penalty for bills past due.

You can also consult your cash flow projection to determine the best time to invest in new equipment, hire new staff, revise your pricing and payment terms, or when to offer promotions and discounts.

Have clients that regularly procrastinate on payments? Check out these tactics to get your clients to pay you faster .

Improving the accuracy of cash flow projections over time

Once you’re in the habit of creating cash flow projections, it becomes easier to improve their accuracy over time.

Comparing projections to actual results can help you improve the accuracy of your cash flow projections, and help identify longer-term patterns and cycles. Seasonal changes in revenue, patterns that contribute to late payments, and opportunities to cut costs will all become more apparent with each new cash flow projection.

While all these benefits won’t come all at once, entrepreneurs can use their cash flow projection to become better operators and better decision makers with each passing month.

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How To Write a Business Plan: A Step-By-Step Guide

April 23, 2024.

No matter how unique your ideas are, launching a successful business without a well-crafted plan is tough. That’s why learning how to write a business plan is key to seeing success from the start. 

An actionable business plan helps you and potential investors understand exactly where you want to go and how to get there. And if you aren’t trying to secure funding, a lean business plan can summarize the highlights to help you in other areas. Here’s everything you need to write a business plan that clarifies your company’s vision.

Business Plan Basics

A business plan outlines the company’s products or services, how it makes money, and its customers. It should also identify the business’s long-term goals and how it’ll achieve them.

But what does a business plan look like? There’s no singular format, but most contain the following core elements:

• Executive Summary . The executive summary is a high-level summary of your business plan’s key points. Include this early in the document, but write it last so you can accurately describe what’s in it.
• Company Description . This section covers your company’s mission, leadership team, and goals. If your business has operated for several years, include a history.
• Market Analysis . This is where you’ll write out your market research. Gather data on your industry. That includes target customer segments and the current competitive landscape. This info demonstrates the viability of your business idea. 
• Product and Service Offerings . Describe your company’s offerings and what sets them apart from competitors. This is your unique value proposition.
• Marketing Plan . Outline your marketing tactics and overall strategy. Mention your plan for pricing, promoting, selling, and distributing your products. This helps investors know you have a strategy in place to grow your business. 
• Logistics and Operations Plan . After describing your products and how you plan to generate demand, lay out how you intend to drive, accept payment for, and support sales.
• Management Overview . Potential investors want to know who they’re betting on. This section provides crucial information about who’s in charge. Include their track records of success, relevant expertise, and roles and responsibilities.
• Financial Analysis and Projections . If you have them, include any historical financial details and performance metrics. This includes assets, liabilities, expenses , projected financial statements, cash flow statements, and anything else offering insights.
• Appendix . This final section is a catch-all for any miscellaneous but valuable background information. Examples might be licenses or patents.’

RELATED ARTICLE — How to Keep Track of Business Expenses

How To Create a Business Plan

With a clear understanding of these documents, it’s time to learn how to write one. Here’s how to put together a strong business plan for your company:

• Carry out a Market Analysis on target demographics, competitors, industry trends, and market.
• In the Company Description and Products and Service Offerings sections, explain what makes your offerings unique.
• Outline your Marketing Plan and sales strategy. Describe your target market and ideal customer. Include factors like geographic region, age range, and education level.
• Map out your Financial Analysis and Projections. If you’re an established business, include data like profit-and-loss statements, a balance sheet delineating your assets and liabilities, and cash flow statements or projections. If you’re still in the early stages, focus just on financial projections instead. Mention anticipated startup costs and your current cash flow.
• Your Logistics and Operations Plan explains how you’ll execute your ideas. Describe any relationships with suppliers, office space, or equipment. Make sure to mention production logistics and any shipping and fulfillment plans. This demonstrates that you understand the day-to-day operations of producing your product.
• Introduce yourself and/or your Management Team and principal hires. Emphasize past successes in related sectors and any unique expertise your staff has.
• Regardless of what order you prepare your business plan in, write the Executive Summary last. Do this by turning your market research and value proposition into tangible objectives and key milestones. This section is typically the first your readers see, so it should make them want to read more.

Be sure to get feedback from colleagues, industry contacts, and friends and family. The more eyes you get on your business plan, the less likely you are to make mistakes or leave out details.

RELATED ARTICLE — How to Offer Net 30 Terms  

What Are Business Plans For?

Writing and adhering to a business plan allows you to think through every aspect of your business. This helps you clarify your vision and shows where your ideas aren’t as developed.

But business plans don’t just clarify the company’s mission and direction. Entrepreneurs hope to answer this tough question with a business plan: how to attract investors. A well-written document can instill confidence by showing how supported it is. This is the main reason many business owners create a comprehensive overview.

And investors aren’t the only ones you’re trying to impress. An inspiring business plan attracts top talent in your industry. It proves that your team is organized, knows what it wants, and has ideas for the future.

Exploring Different Types of Business Plans

Business plans can be categorized based on type and style. Let’s explore three of the most common types.

A traditional business plan is the most common. This is what lenders and investment funds want to see before making any decisions. Traditional business plans are typically long. That’s because they provide a thorough overview of your company’s abilities, finances, and prospects

If you’re not courting investors, you might prefer a lean business plan. This type of document is shorter, focusing on the highlights instead of completeness. A lean business plan is great for brainstorming or onboarding new team members with reduced time and effort. But, because they’re less comprehensive, lean business plans aren’t ideal for seeking outside investment. Investors might not see how viable your business is without the added details. 

Finally, if your organization is a nonprofit, focus on the impact you hope to make for your chosen cause, not how you’ll grow revenue. But donors may want to see a more detailed business plan before making sizable donations.

RELATED ARTICLE — How to Write an Invoice in 5 Steps

Caveats To Watch Out For

An actionable step-by-step business plan requires a strong understanding of how it will help you reach your company’s goals. Now that you know how to start a business plan, here are some common mistakes to avoid when you start writing:

• Putting on Rose-colored Glasses . When you believe in your company and its mission, it’s easy to be too optimistic about future prospects. You might also overlook potential roadblocks. Be sure to keep one foot on the ground to avoid misrepresenting your company’s potential.
• Focusing Too Much on the Details . If your company is new or not yet established, focus on high-level strategy and vision. Save the details for when you’ve generated some actionable data.
• Setting Fuzzy Goals . Keep milestones concrete and measurable to meaningfully track progress.
• Overcomplicating . There’s nothing wrong with being comprehensive, but creating an overly intricate strategy makes it harder to execute. Keep it simple.
• Setting It in Stone . Your business plan won’t be much of a guide if you’re constantly making changes. But it’s important to move on from ineffective strategies or unachievable goals. Striking the right balance between stable ideas and flexible methods ensures your business plan is a help, not a hindrance.

5 Tips for an Effective Business Plan

Now that you know what to avoid, let’s learn some tips for making your business plan as effective as possible:

• Clearly Articulate Your Value Proposition . What unsolved problem does your company provide the solution for?
• Don’t Skimp on Market Research . A seemingly great idea won’t sell if no one is interested in buying it.
• Set Quantifiable Goals You Can Track . It’s difficult to measure progress toward vague, qualitative milestones.
• Hype up Your Team . Lenders and investors want to see that qualified personnel run your company.
• Manage Expectations . Don’t make promises you can’t keep. Surpassing your targets is impressive; falling short isn’t.

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• How to Perform a Cash Flow Analysis...

How to Perform a Cash Flow Analysis (Template + Examples)

Listen to the blog:

Table of content, key takeaways.

• Explore cash flow analysis basics, components, and key indicators for financial insights.
• Uncover a step-by-step guide to performing cash flow analysis and methods to assess key items in cash flow statements.
• Gain insights into financial wellness and strengths through real-life cases and comparative analysis.

Introduction

In the dynamic realm of business, the key to survival and growth lies in mastering the art of financial management. Amidst the myriad of financial metrics and strategies, one stands tall in its ability to unlock a company’s true potential: cash flow analysis.

It’s like the beating heart of an organization, providing the lifeblood needed to sustain operations, fuel growth, and weather economic storms.

Read on to explore the profound importance of cash flow analysis – what it entails, its components, steps to prepare an analysis, and real-life examples, empowering your business for financial success.

What is Cash Flow Analysis?

Cash flow analysis examines and evaluates the inflows and outflows of cash within a company over a specific period. It provides a comprehensive view of how cash moves through a business, highlighting the sources and uses of cash and offering valuable insights into its liquidity.

Let’s explore this concept through Sarah’s story, a savvy retail store owner facing perplexing financial challenges:

Sarah’s retail store witnessed a surge in sales, hinting at success. Yet, beneath the surface, she grappled with expense management and financial stability. To tackle this dilemma, Sarah embraced meticulous cash flow analysis, uncovering a hidden truth:

• Although her revenue appeared promising, delayed payments and mounting expenses created a cash crunch.
• Empowered with these insights, Sarah took decisive action, implementing strategies to optimize her cash flow.
• She gained a deeper understanding of the timing of cash inflows and outflows, enabling her to anticipate and plan for potential cash shortages or surpluses.

This newfound knowledge-empowered Sarah to take control of working capital management, meeting her financial obligations with precision.

Why is Cash Flow Analysis Important?

Cash flow analysis holds immense significance for businesses, and here’s why:

Components of Cash Flow Analysis

To gain a comprehensive understanding of a company’s financial landscape, cash flow analysis comprises three essential components:

Cash Flow from Operations:

• Focuses on the cash generated or used in the company’s day-to-day operations.
• Includes revenue, expenses, changes in working capital, and non-cash items like depreciation and amortization.
• Reveals the cash flow directly associated with the core business operations.

Cash Flow from Investing:

• Examines the cash flow resulting from purchasing or selling long-term assets, such as property, equipment, or investments.
• Provides insights into how investment decisions impact the company’s cash position.
• Assesses the effectiveness of capital allocation and the potential returns generated from investments.

Cash Flow from Financing:

• Analyzes the cash flows resulting from activities related to financing.
• Includes issuing or repurchasing shares, obtaining or repaying loans, and paying dividends.
• Assesses the impact of financing decisions on the company’s cash flow and capital structure.

By dissecting these components, cash flow analysis unveils the intricate interplay between a company’s operational, investing, and financing activities.

Steps to Perform Cash Flow Analysis

To begin the cash flow analysis process, it is essential to have a cash flow statement, which provides a detailed account of the cash inflows and outflows within a specific period.

The cash flow statement is crucial as it captures the actual cash movement, helping identify the sources and uses of cash and providing a foundation for the analysis. Typically, the finance team leverages accounting software or readily available free templates to generate these statements.

The overall net cash flow is obtained by summing up the net cash flows from operations, investing, and financing. It represents the company’s cash position change during a specific period.

How to Perform a Cash Flow Statement Analysis

When conducting a cash flow statement analysis, there are several major items to look out for that can provide insights into the health of a business:

Operating Cash Flow Trends:

• Analyzing the operating cash flow trend over time can indicate the business’s ability to generate consistent cash from its core operations.
• Positive operating cash flow demonstrates that the business generates more cash than spending, while negative cash flow may suggest financial challenges.
• Here’s a general formula to determine operating cash flow: 

Cash Flow from Operations = Net Income + Non-cash Expenses – Changes in Working Capital

Free Cash Flow:

• Assessing the trend of free cash flow, which is the cash available after meeting operating expenses and capital expenditures, is crucial.
• Positive free cash flow indicates the company has sufficient funds to invest in growth opportunities or return value to shareholders.

Working Capital Management:

• Monitoring changes in working capital , such as accounts receivable, inventory, and accounts payable, provides insights into the efficiency of cash conversion cycles.
• Increasing receivables or inventory levels without a corresponding rise in payables can indicate potential liquidity issues.

Cash Flow Adequacy:

• Evaluating whether the cash flow is adequate to cover debt payments, dividends, and planned investments helps assess the company’s financial stability.
• Insufficient cash flow to meet obligations may lead to negative cash flow and the need for external financing.

Cash Flow Ratios:

• Calculating key cash flow ratios , such as the operating cash flow ratio or cash flow margin, can provide a comparative analysis against industry benchmarks.
• Deviations from industry norms may indicate strengths or weaknesses in managing cash flow.

By following these steps and focusing on these key items, businesses can gain valuable insights into their financial health, make informed decisions, and take action to optimize cash flow, ensure financial stability, and drive sustainable growth.

Cash Flow Analysis Example

Here’s a snapshot of a cash flow analysis between two hypothetical firms – Monsters Inc. and Gusteau’s- showcasing identical net income of $500,000 . Furthermore, their year-end cash stands at $600,000, with an equal alteration in cash ($550,000) over the year.

Key Insights from the Cash Flow Analysis:

• Monsters Inc. exhibits:
• A negative operational cash flow of -$50,000 , indicating less cash generated from its primary operations.
• Dependent on a singular asset sale gain ($600,000) to bolster their overall cash position.
• Gusteau’s, in contrast, exhibits:
• A robust operational cash flow of $600,000 indicates a healthy cash generation from its core business activities.
• Strategic use of cash for property acquisition ($27,500) and debt repayment ($30,000) , indicates growth-oriented and financially judicious decisions.

The analysis underlines that Monsters Inc. may face cash flow pressures due to low operational income and reliance on non-recurring items for cash generation. Conversely, Gusteau’s demonstrates a robust cash flow position, reflecting financial stability and efficient operational performance.

This comparative study underscores the importance of cash flow analysis in comprehending a company’s financial wellness and pinpointing areas of concern or strength.

Impact of Cash Flow Analysis on Business Success

Cash flow analysis stands as a cornerstone of financial management for businesses of all sizes, serving as a real-world litmus test for the financial health of any business.

Liquidity Evaluation:

Consider a retail business gearing up for the holiday season. A cash flow analysis ensures they have sufficient cash on hand to stock up on inventory and meet the anticipated surge in demand for tomorrow.

How to Create a Cash Flow Projection (Template + Examples)

Profitability versus Cash Flow:

Picture a tech start-up that has secured substantial sales contracts, but payment terms are net-90 days. The start-up may be profitable on paper, but a cash flow analysis reveals if they have sufficient immediate cash to cover operational expenses.

Investment Attraction:

When a food chain is seeking expansion funding, investors would evaluate its cash flow. Positive, consistent cash flow signals financial stability and growth potential, enhancing investor confidence .

However, conducting cash flow analysis manually can be arduous and error-prone due to the high volume of transactions coupled with expanding customer portfolios. The task of value-added analysis often plays second fiddle to the process of data administration and preparation. This is where cash flow analysis software becomes essential.

Cash Flow Analysis Software that Grows with Your Business

Employing a cash management software solution, particularly one that integrates into your existing tech stack and other accounting systems, can significantly optimize cash flow analysis. This transition is transformative, especially for businesses managing large volumes or complex financial structures. Here’s why:

• Simplify Complex Calculations: With software like HighRadius’s Cash Management, intricate computations involved in free cash flow analysis are automated, eliminating data collection and administrative complexities.
• Seamless Reporting: Once set up, your intuitive dashboards and reporting features are readily accessible, presenting the underlying details in a centralized workspace.
• Automated Forecasting: AI-driven software can predict future cash flow trends, providing real-time strategic, actionable insights for business planning.
• Efficient Workforce Utilization: Robust cash management software automates significant parts of the financial analysis process, freeing your finance teams to focus on pattern detection and improving results rather than crunching numbers.

Understanding your cash flow and position through regular check-ins is vital, whether a small business or a large enterprise. A powerful cash management system turns a tedious, time-consuming process into a streamlined operation, driving better business results through advanced financial analysis.

Cash Flow Analysis FAQs

What is the purpose of cash flow analysis.

Cash flow analysis provides businesses with a complete view of their financial landscape. Examining cash inflows, outflows, and liquidity needs enables a deeper understanding of micro-financial trends, empowering businesses to make informed decisions and optimize their financial strategies.

What is the formula for cash flow?

The formula for calculating cash flow is Cash Flow = Cash Inflows – Cash Outflows.

Is cash flow the same as profit?

No, cash flow and profit are not the same. While profit represents the excess of revenue over expenses, cash flow reflects the actual cash movement in and out of business.

What is considered strong cash flow?

Strong cash flow refers to consistent positive cash flows, indicating that a business generates enough cash to cover expenses, invest in growth, and meet financial obligations. It signifies financial stability and supports business operations and expansion.

What type of cash flow is most important?

All components of cash flow (operations, investing, and financing) are important. However, cash flow from operations is often considered the most critical, reflecting the company’s core business performance.

What is global cash flow analysis?

Global cash flow analysis assesses a business’s financial position by considering income sources, expenses, and activities across entities and jurisdictions. It provides a comprehensive view of the overall financial health.

Related Resources

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Cash and Liquidity Management – Importance, Types & Strategies

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How to create a cashflow plan and why it's so important

A cash flow plan helps those responsible to make optimal decisions because it shows how the cash situation will develop in the coming months . Here we show you how to create and work with a cash flow plan.

Cash flow plan: Definition

A cash flow plan shows the current and future cash position of a company. It shows the expected cash flows on a monthly, weekly or even daily basis. The cash flows represent all income and expenses of the company that are related to its operating activities.

To create a cash flow plan, you need to have insight into all the business accounts of a company where transactions take place. Each transaction is a cash flow, where an outgoing cash flow is an expense and an incoming cash flow is a revenue.

By subtracting these expenses from the income each month, week or day, you get the expected cash balance, which can be either positive or negative, i.e. a surplus or a deficit.

If the cash balance is regularly negative, a cash shortage occurs, which in the worst case leads to insolvency. The cash flow plan helps to identify cash shortages at an early stage so that you have enough time to act.

Cash flow plan in 3 steps

Revenue & expenses from the last 6 months up to now.

If you have never prepared a cash flow plan before, we recommend that you first get an overview of your past cash situation. This will help you later to make better estimates for your expected income and expenses.

Go through all your bank statements from the last six months and divide the different income and expenses into categories, for example:

• Revenue from sales
• Income from financial investments
• Tax refunds
• Revenue from licences
• Other revenues
• Salary payments and wages
• Expenses for marketing
• General expenses (electricity, bin collection, etc.)
• Fees for software subscriptions and licenses
• Investments
• Tax payments

For each month, add up the individual transactions in each category, e.g. all salary payments to your employees in the category "Salary payments and wages". You then enter the result for the respective month in a table.

Proceed in this way for each category so that at the end you have an overview of the past six months.

Calculate the cash balance for each month

Then deduct the expenses from the revenues in each month:

• Balance per month = Total revenue in month - total expenses in month
• You offset the result against the cash balance of the previous month and then get the total cash balance, which shows you how much cash you have available in total for the respective month:
• Total cash balance = Cash balance from previous month + cash balance from current month

Anticipate future cash flows

Once you have calculated the cash balance for the past six months, take a closer look at the values in the individual categories: In some cases, you will find that the expenses are the same or vary only slightly from month to month, e.g. salary payments and fees for software subscriptions.

You now enter these recurring expenses in your table for the coming months, because you can assume that they will remain the same. For all other categories where the values fluctuate strongly, you derive estimated values.

For the expected revenues, take into account how customer demand will develop. If you assume that this will increase, enter a larger value for revenue from sales in the coming months.

Once you have entered your expected values for all categories in the table, calculate the expected cash balance and the total cash balance. You will then see how much cash you will have available in the coming months. The more you know about your business and its development, the more accurate estimates you can make and the more accurate your cash flow plan will be.

Cash flow plan Example

The following table shows two months of how cash flow planning works in principle:

Cash flow plan template

You can easily create such a table in Excel or download our free cash flow plan template here. You can adapt the table according to your needs, as there may be many more categories in your company.

It is important that you record all your revenues and expenses in the cash flow planning, because this is the only way to get an accurate overview of your current and future cash situation. How to work with a cash flow plan

Once you have completed the table and calculated the total cash balance for the coming months, you can see exactly how much cash you are likely to have available.

For example, if you assume that income will fall, you can see whether your cash will be sufficient to cover running costs or whether a cash shortage will arise. If you recognise such situations at an early stage, you can take measures beforehand so that the cash shortage does not arise in the first place.

On the other hand, you can also see how much cash you will have available for investments. With the help of the cash flow plan, you can estimate favourable times when making an investment will put the least strain on your liquidity. Your cash flow plan therefore helps you to optimally manage your operative business.

Digital tools to create a cash flow plan

You have probably noticed that creating a cash flow plan is very time-consuming because you first have to collect all income and expenses, enter them into categories and then offset them against each other. Errors can easily occur and distort the result.

With the help of a digital cash flow management tool, this process becomes easier. For example, Agicap's software automatically connects to all your business accounts and retrieves the transactions from there every day.

Recurring deposits and withdrawals are also automatically sorted into a category you define. The tool then also updates your cash flow plan based on the current transactions, so you have an up-to-date cash flow every day.

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The essential steps for creating a cash plan

Small Business Finance

6 min read

If you’re like many other business owners, the mere thought of managing your finances makes you want to bury your head in the sand. You may find yourself asking, “How can I create a cash plan? Wait—what is a cash plan?” And that’s a great place to start: What exactly is a cash plan? Think about it like this: If your business is a car, cash is the gas. And sometimes, despite our best efforts, the tank hits empty before the next gas station. In order to keep driving your business toward the future you envision, a cash plan ensures that you won’t stall out.

Before you begin, it’s key to understand the difference between profit and cash flow . In other words, the difference between your revenue and expenses as you’ve anticipated versus how they’re actually flowing . You may have already encountered a scenario in which your anticipated profit remains the same even while your current cash position decreases, or maybe your net profit decreases but your cash position increases—no matter the scenario, changes to cash surplus create an immediate impact. And though your business may run unprofitably for a period of time, it won’t run this way forever. In short, your cash plan is a budget for your cash. It’s a cash flow statement for the future, including forecasts of receipts and expected disbursements in the coming months.

In order to create a sustainable and flexible cash plan, there are some vital steps to put in place. Whether you’re working in tandem with an in-house accountant, a financial advisor or going it alone , here’s an overview that’ll help get you started:

1. Set up your cash flow cycle

The whole goal of this process is to control the financial activities in your business to maximize cash flow—and to do that, you need to set a review cadence. Begin by establishing your goals based on a period of time. When will you check in to review the cash flow cycle? Weekly, bi-weekly, monthly, quarterly—or some combination? If your business is in a particularly uncertain position, you may even want to begin with daily reviews. Choose a timeline that works for you and stick with it. Use it not only to see your cash standing today , but also to look back to previous time periods and to project your future cash position.

2. Produce a cash flow statement

At the end of a cycle, generate your cash flow statement . With this, you’ll be able to review your cash position and make any adjustments you need based on the variance report. The critical formula of a cash flow statement is simple: 

Cash Receipts - Cash Disbursements = Net Cash Flow 

The result is a positive or negative net cash flow—that figure is your ending cash position for the cycle, as well as the beginning cash position for the next cycle’s report. 

Once you have a statement set up, don’t just use it going forward. Assuming you haven’t yet created any cash flow statements, work with your accountant (or use your accounting software) to generate cash flow reports for previous cycles. Start with your beginning cash position for this cycle, then pull receipts and disbursement data from your bank account statements and your accounting software, and plug it into the columns for the previous month. Work backward until you produce cash flow statements for three, six or twelve of the previous months. 

3. Forecast your cash 

Remember, your cash plan is nothing more than a cash flow statement for the future, using forecasted rather than historical numbers. With that in mind, here’s another formula for you: 

Projections + Predictions = Forecast

Projections are what you guess your likely sales figures will be based on previous years’ experience. Predictions , on the other hand, anticipate any possible changes in the future that could impact sales for better or worse—plans for marketing, new products or market expansion, for example.

As you forecast cash flow for future periods, you’ll need to anticipate cash receipts from your sales and from accounts receivable, and as well as other miscellaneous or occasional sources. I know, it can feel vague at first to “guess” at figures, but you’re basing this estimation on real numbers.

Cash from sales looks back to previous months in order to estimate an average, and take into account any upcoming factors that might affect this number. For example, say you have a seasonal business and revenue from one season vastly outweighs others. Or maybe you’re launching a highly anticipated new product or service. All of this matters.

Accounts receivable is a bit different. You likely know that your customers don't often pay you minute the minute they get the invoice (but wouldn’t that be nice?). Take a look at the history of your numbers with your accountant and calculate the average amount of time for collection of receivables. Ideally, you want to aim for 30 days or less. If it’s significantly slower than that, you may want to review your credit and collection policies.

Miscellaneous cash sources are things like interest gained, tax refunds, rental income, credit payments, etc. You should be able to predict these numbers fairly regularly and accurately. Don't worry much about predicting smaller, irregular receipts—just focus on major surprises. It’s okay to be conservative in your forecasts—having more cash than you predicted is never a bad thing! Just keep track of those numbers.

4. Review and manage your cash plan variance report

Review your cash flow on a regular basis so that you stay in the know on how things are flowing. If you end a cycle with net positive cash flow, great—you have a cash cushion for any unforeseen circumstances. And on the other end, knowing that your cash position is in the negative can help you plan ahead in other directions. 

Comparing variance reports—which show the difference between your expected cash flow in and the actual income—will also paint a bigger picture of what’s going right or wrong in your business in that given period. Maybe your accounts receivable cash is lower than anticipated, so it’s time to check in with those customers or tighten up your policy. Or maybe, you see that numbers are way up in response to a new salesperson, and you know they’re the right fit for the job. 

Keeping an eye on cash flow in real time is key to proactively managing budgets and staying on track with financial planning. But it’s also important to keep in mind that part of cash planning is to think about and create a cash reserve . In general, aim to determine your average monthly expenses, then build a reserve that’s 2-3 times that amount (or more depending on how big your company is). That way, your business can still run for a couple of months in case of an emergency or unforeseen circumstances. It may take several months to build that reserve up, but it's never too late to start now.

Feeling inspired to implement a cash flow system in your small business, but would like support to get started? We’re here to help.

Written by Adam Traub

Adam Traub is a senior member of the EMyth Coaching Team and an expert in the EMyth Approach. In his nearly 20 years with the company, his experience has included program development, coach training, customer satisfaction and success, and personally coaching hundreds of business owners through the joys and challenges of redesigning their businesses. Adam’s dedication to helping business owners and leaders comes from his own interest in culture and people dynamics, as well as personal experience working through the EMyth Program as a client, where he saw the possibility for all leaders to transform their companies, create a better culture, and achieve their vision.

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Preparing a cash flow forecast: Simple steps for vital insight

One of the questions we’re often asked by small business owners is, “how do I prepare a cash flow forecast?” It’s an important part of financial planning for any business. But, if you’re an entrepreneur or founder, you may not have an accounting or finance background.

It’s really simple to create your own forecast. And once you know how, it will become one of the most important pieces of insight into your business you have.

Why is a cash flow forecast important?

Cash flow planning is essential: you need cash in the bank to pay your bills. Staying on top of your cash flow will help you see if you’re going to run out of money - and when - so you can prepare ahead of time. Perhaps it will show you that you need to cut overheads, find new investment, or spend time generating sales.

On the flip side, you might be doing well, and you’re considering expanding into new markets, investing in new products, taking on bigger premises, or recruiting new staff. Having accurate cash flow projections will help you see if you can afford to take the plunge.

Four steps to a simple cash flow forecast

One option is to use free financial forecasting software online, which can help you plan ahead for the next week, 30 days, or six weeks. Or you can follow the four steps below to build your own cash flow forecast.

1. Decide how far out you want to plan for

Cash flow planning can cover anything from a few weeks to many months. Plan as far ahead as you can accurately predict. If you’re well-established, you might have a predictable sales pipeline and data from previous years. If you’re a new business, you might not have a huge amount of data - so the further out you go, the less accurate your predictions will be.

Don’t worry too much if you can’t plan far ahead. Your cash flow forecast can change over time. In fact, it should. As things change, or you get more exact estimates, you can update your plan.

2. List all your income

For each week or month in your cash flow forecast, list all the cash you’ve got coming in. Have one column for each week or month, and one row for each type of income.

Start with your sales, adding them to the appropriate week or month. You might be able to predict this from previous years’ figures, if you have them. Remember though, this is about when the cash is actually in your bank account. Put the figures in for when you know clients will pay invoices, or bank payments will clear.

Also remember to include all non-sales income, for example:

• Tax refunds
• Investment from shareholders or owners
• Royalties or licence fees

Add up the total for each column to get your net income.

3. List all your outgoings

Now you know what’s coming in, work out what you’ve got going out. For each week or month, make a list of all the money you’ll be spending, for example:

• Raw material
• Bank loans, fees and charges
• Marketing and advertising spend

Once you’ve listed everything you spend, add up the total for each column to get your net outgoings.

4. Work out your running cash flow

For each week or month column, take away your net outgoings from your net income. That will give you either a positive cash flow figure (you’ve got more cash coming in than you’re spending) or a negative cash flow figure (you’re spending more than you’ve got coming in).

You can then keep a running total, from week to week, or month to month, to get a picture of your cash flow forecast over time. Too many negative weeks might spell trouble, and you’ll need to do some forward-planning to make sure you can meet your commitments - e.g. paying salaries, loan payments, and rent. Equally a few positive months might signal that you’ve got money to expand or invest.

Jenni Chance

Senior Manager, Entrepreneurial & Private Business, PwC United Kingdom

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What Is Cash Flow?

• Formula & Calculation

Understanding Cash Flow

• Financial Statement
• Analyzing Cash Flows

Example of Cash Flow

The bottom line.

• Corporate Finance

Cash Flow: What It Is, How It Works, and How to Analyze It

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Cash flow is the net cash and cash equivalents transferred in and out of a company. Cash received represents inflows, while money spent represents outflows. A company creates value for shareholders through its ability to generate positive cash flows and maximize long-term free cash flow (FCF) . This is the cash from normal business operations after subtracting any money spent on capital expenditures (CapEx) .

Key Takeaways

• Cash flow is the movement of money in and out of a company.
• Cash received signifies inflows, and cash spent is outflows.
• The cash flow statement is a financial statement that reports a company's sources and use of cash over time.
• A company's cash flow can be categorized as cash flows from operations, investing, and financing.

Investopedia / NoNo Flores

Formula and Calculation of Cash Flow

You can easily calculate a company's cash flow using the formula below. To do this, make sure you locate the total cash inflow and the total cash outflow.

CF = TCI - TCO

• TCI = Total cash inflow
• TCO = Total cash outflow

Cash flow refers to the money that goes in and out of a business. Businesses take in money from sales as revenues (inflow) and spend money on expenses (outflow). They may also receive income from interest, investments, royalties , and licensing agreements and sell products on credit. Assessing cash flows is essential for evaluating a company’s liquidity , flexibility, and overall financial performance.

Positive cash flow indicates that a company's liquid assets are increasing, enabling it to cover obligations, reinvest in its business, return money to shareholders, pay expenses, and provide a buffer against future financial challenges. Companies with strong financial flexibility fare better, especially when the economy experiences a downturn, by avoiding the costs of financial distress .

Cash flows are analyzed using the cash flow statement , which is a standard financial statement that reports a company's cash source and use over a specified period. Corporate management, analysts, and investors use this statement to determine how well a company earns to pay its debts and manage its operating expenses. The cash flow statement is an important financial statement issued by a company, along with the balance sheet and income statement.

Cash Flow Statement

The cash flow statement acts as a corporate checkbook to reconcile a company's balance sheet and income statement . The cash flow statement includes the bottom line , recorded as the net increase/decrease in cash and cash equivalents (CCE) .

The bottom line reports the overall change in the company's cash and its equivalents over the last period. The difference between the current CCE and that of the previous year or the previous quarter should have the same number as the number at the bottom of the statement of cash flows.

Types of Cash Flow

Cash flows from operations (cfo).

Cash flow from operations (CFO) describes money flows involved directly with the production and sale of goods from ordinary operations. Also known as operating cash flow , CFO indicates whether or not a company has enough funds coming in to pay its bills or operating expenses .

Operating cash flow is calculated by taking cash received from sales and subtracting operating expenses that were paid in cash for the period. Operating cash flow is recorded on a company's cash flow statement, indicates whether a company can generate enough cash flow to maintain and expand operations, and shows when a company may need external financing for capital expansion.

Cash Flows From Investing (CFI)

Cash flow from investing (CFI) or investing cash flow reports how much cash has been generated or spent from various investment-related activities in a specific period. Investing activities include purchases of speculative assets , investments in securities, or sales of securities or assets.

Negative cash flow from investing activities might be due to significant amounts of cash being invested in the company, such as research and development (R&D) , and is not always a warning sign.

Cash Flows From Financing (CFF)

Cash flows from financing (CFF) shows the net flows of cash used to fund the company and its capital. CFI is also commonly referred to as financing cash flow . Financing activities include transactions involving issuing debt, equity, and paying dividends.

Cash flow from financing activities provides investors insight into a company’s financial strength and how well its capital structure is managed.

How to Analyze Cash Flows

Using the cash flow statement in conjunction with other financial statements can help analysts and investors arrive at various metrics and ratios used to make informed decisions and recommendations.

Below is Walmart's ( WMT ) cash flow statement for the fiscal year ending on Jan. 31, 2024. All amounts are in millions of U.S. dollars.

Investments in property, plant, and equipment (PP&E) and acquisitions of other businesses are accounted for in the cash flow from the investing activities section. Proceeds from issuing long-term debt, debt repayments, and dividends paid out are accounted for in the cash flow from the financing activities section.

Walmart's cash flow was positive, showing an increase of $1.09 billion, which indicates that it retained cash in the business and added to its reserves to handle short-term liabilities and fluctuations in the future.

How Are Cash Flows Different Than Revenues?

Revenue is the income earned from selling goods and services. If an item is sold on credit or via a subscription payment plan, money may not yet be received from those sales and are booked as accounts receivable. These do not represent actual cash flows into the company at the time. Cash flows also track outflows and inflows and categorize them by the source or use.

What Is the Difference Between Cash Flow and Profit?

Cash flow isn't the same as profit. Profit is specifically used to measure a company's financial success or how much money it makes overall. This is the amount of money that is left after a company pays off all its obligations. Profit is found by subtracting a company's expenses from its revenues.

What Is Free Cash Flow and Why Is It Important?

Free cash flow is left over after a company pays for its operating expenses and CapEx. It is the remaining money after items like payroll, rent, and taxes. Companies are free to use FCF as they please.

Do Companies Need to Report a Cash Flow Statement?

The cash flow statement complements the balance sheet and income statement. It is part of a public company's financial reporting requirements since 1987.

Why Is the Price-to-Cash Flows Ratio Used?

The price-to-cash flow (P/CF) ratio is a stock multiple that measures the value of a stock’s price relative to its operating cash flow per share. This ratio uses operating cash flow , which adds back non-cash expenses such as depreciation and amortization to net income.

P/CF is especially useful for valuing stocks with positive cash flow but are not profitable because of large  non-cash charges .

Cash flow refers to money that goes in and out. Companies with a positive cash flow have more money coming in, while a negative cash flow indicates higher spending. Net cash flow equals the total cash inflows minus the total cash outflows.

U.S. Securities and Exchange Commission. " Beginners' Guide to Financial Statements ."

U.S. Securities and Exchange Commission. " Explanation of Non-GAAP and Other Financial Measures ."

U.S. Securities and Exchange Commission. " Form 10-K ," Page 5.

FASB. " Summary of Statement No. 95 ."

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Tesla's earnings report was worse than expected, but Elon Musk has a plan

• This post originally appeared in the Insider Today newsletter.
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Hi! Costco shoppers who scooped up the store's gold bars are learning that being an amateur commodities trader is actually really hard !

In today's big story, we're looking at Tesla's earnings report and what comes next for the EV maker.

What's on deck:

Markets: Cathie Wood's investors are jumping ship .

Tech: Threads now has more daily US users than X .

Business: America produces 40 million tons of plastic waste a year. It's running out of places to put it .

But first, the man with the plan.

If this was forwarded to you, sign up here.

The big story

Tesla's turnaround plan.

Bad news: Tesla's earnings report was worse than expected.

Good news: Elon Musk has a plan.

Tesla's disappointing earnings illustrated how bad a year it's having . The EV maker missed profit and revenue estimates , but those weren't the only ugly numbers.

Tesla's free cash flow was negative $2.5 billion in the quarter, a shocking 674% year-over-year drop. (The company did point out it spent $1 billion on AI infrastructure investments this quarter.)

Those figures aren't what you want to see from a public company. And even though Tesla tried to pin the blame on hybrids , such a bad earnings miss isn't usually something Wall Street overlooks.

Except… that's exactly what investors did .

Details on its robotaxis plan and news of expediting the release of an affordable model were all Wall Street needed to get back in on Tesla. Shares popped nearly 11% in premarket trading, a big win for a company down more than 40% on the year.

Tesla's ambitions around robotaxis and an affordable model tap into key trends.

Speeding up the launch of cheaper Tesla models — whenever that may be; details on a timeline were relatively scant — addresses a consumer that has shifted away from wanting big, expensive EVs .

Discussion of robotaxis, meanwhile, allows Tesla to ride the stock market's AI wave that has sent other companies' stock prices skyrocketing over the past year.

Perhaps that's why Musk spent so much of the earnings call discussing autonomy and the progress made with Tesla's Full Self-Driving software .

But having a plan is one thing. Executing it is something else entirely. Musk, for all his accomplishments, hasn't always held firm to future milestones he's targeted.

To that point, Business Insider's Linette Lopez suggested an even bigger initiative Tesla consider: Musk stepping down .

The CEO, she argues, is ultimately responsible for Tesla squandering its lead in the EV market and not better insulating itself from threats when things were going well.

Considering Musk's close ties with some of Tesla's board members, such a drastic move is a long shot. A more realistic request might be Musk pulling back on other responsibilities , but that also seems unlikely. Musk told analysts on the earnings call that Tesla is the majority of his work .

Ultimately, Musk's fate could be decided by investors. Tesla is seeking shareholder approval for Musk's $55 billion pay package, which a Delaware judge has already struck down .

If investors vote against the package at Tesla's annual meeting in June, who knows where Musk — and his AI ambitions — will end up .

3 things in markets

The March sell-off in stocks could be the start of something bigger. JPMorgan's Marko Kolanovic highlighted a "problematic backdrop" in equities that investors seem to be ignoring . Stubborn inflation and geopolitical concerns aren't going anywhere and "put additional pressure on investors to de-risk," Kolanovic wrote.

Cathie Wood's investors are heading for the exits. Outflows for Wood's ARK funds are ramping up after a three-year decline . This year alone the suite of ARK ETFs has net outflows of $2.2 billion, triple what it endured last year.

Stocks for a strong economy. Goldman Sachs highlighted 30 names that they think will outperform the market because they're investing heavily in future growth opportunities like artificial intelligence. Meta, Intel, and Micron Technology were among the stocks the bank flagged.

3 things in tech

Microsoft is blocking employee access to Perplexity AI . Perplexity AI is one of the largest customers of Microsoft's Azure OpenAI service. Other AI tools, like Google's Gemini chatbot, are also blocked on Microsoft's employee devices .

Threads has overtaken X in one key metric. New data shows Meta's Threads is consistently surpassing Elon Musk's X in daily users in the United States. While X still has more monthly users, Threads could be on its way to becoming bigger than its competitor.

Scoop: Navan's IPO. The a16z-backed travel and expense platform, which was valued at $9.2 billion back in October 2022, is targeting an April 2025 public listing , a person with direct knowledge of the matter told BI.

3 things in business

America is drowning in plastic. In 2018, China stopped taking the United States' plastic imports. The US is now scrambling to find alternatives for the 40 million tons of plastic it produces each year.

How Amazon won over skeptical advertisers. Since launching three months ago, Prime Video's ads have made a positive impression on advertisers, luring them in with generous price incentives and sponsorships .

The Senate passed a bill that could ban TikTok. Joe Biden has signaled that he'll sign the legislation, which would effectively ban TikTok from the US app store . The final vote was 79 senators in favor, and just 18 opposed.

In other news

The FTC is fighting for your right to job-hop .

These 18 senators voted against Ukraine and Israel aid .

The American Kennel Club's pedophile problem .

Patriots owner Robert Kraft yanks support for Columbia as Israel-Gaza protests intensify .

Trump may be held in contempt Tuesday after hush-money DA cites at least 10 gag-order violations .

Apple sinks to 3rd place in China as iPhone sales slide .

A hospital in Australia is begging snakebite victims to stop bringing the snakes in with them .

I went on a date with an AI chatbot. He fell head over heels in love with me, but I got the ick .

What's happening today

Today's earnings: Boeing, Meta, IBM, and other companies are reporting .

The US Supreme Court will hear the Idaho abortion ban case.

The Insider Today team: Dan DeFrancesco , deputy editor and anchor, in New York. Jordan Parker Erb , editor, in New York. Hallam Bullock , senior editor, in London. George Glover , reporter, in London.

Watch: What happens when Elon Musk moves markets with a tweet

• Main content

Ukraine-Russia war latest: Fighting intensifies in eastern Ukraine as troops fall back, top general says; UK minister estimates 450,000 Russian losses since war began

Gen Oleksandr Syrskyi says his troops have taken up new positions west of Berdychi, Semenivka and Novomykhailivka in order to conserve their forces while armed forces minister Leo Docherty tells the UK Defence Journal tens of thousands have deserted Russian's military since February 2022.

Sunday 28 April 2024 15:58, UK

• Top general: Fighting intensifies in eastern Ukraine as troops fall back
• UK minister estimates 450,000 Russian losses since war began
• Tajikistan citizens warned not to travel to Russia
• 'Well-provisioned' Ukrainian troops could prevent Russian advances
• Russia destroys 17 drones launched by Ukraine
• Explained : Why is Chasiv Yar the next target for Russia?
• Your questions answered: Will Ukraine launch another spring offensive?
• Listen to the Sky News Daily above and  tap here  to follow wherever you get your podcasts
• Live reporting by Lauren Russell

Since 2023, there's been a record 30% increase in Russian men aged 31-59 with disabilities, the UK's Ministry of Defence says.

In data provided by the MoD, there were 2.17 million Russian men aged 31-59 with disabilities, up from 1.67 million the year before. 

It said the increase may be down to a growth in military casualties.

Two people have been injured after Russian strikes in the cities of Kupiansk and Vovchansk, local authorities have said.

A 52-year-old was taken to hospital for treatment after being injured, the military administration in Kharkiv said. 

Meanwhile, a 36-year-old woman was trapped under rubble and was given medical care after being rescued. 

Both cities are in the region of Kharkiv with Vovchansk close to the Russian border and frontline, while Kupiansk is crucial for logistics. 

Fighting in eastern Ukraine has worsened, with troops falling back to new positions in at least three places along the frontlines, Ukraine's top general has said.

Oleksandr Syrskyi said in a statement on the Telegram messaging app that his troops had taken up new positions west of the villages of Berdychi, Semenivka and Novomykhailivka in order to conserve their forces. 

All three villages are in the Donetsk region of Ukraine. 

Mr Syrskyi said Russian troops "achieved certain tactical successes in these areas, but could not gain operational advantages".

Earlier, we reported that the Russian defence ministry claimed that they had taken the village of Novobakhmutivka which is in the same region.

Ukraine has not commented on the claim.

Led by a 68-year-old commander known as Grandpa, Ukraine's Steppe Wolves unit, is made up of volunteers who are considered too old to fight - but still want to.

Staying behind the frontline, the mobile artillery unit use truck-mounted rocket launchers, take orders from field commanders and work with other troops, contributing to the war effort despite lacking official support from the military.

"We... get by thanks to the pension fund," commander Oleksandr Taran said.

The unit also depends on donations, in order to repair faulty rounds and capture weapons from the enemy. 

Mr Taran said his unit has been attempting to officially join Ukraine's armed forces to directly receive ammunition - and salaries - but has so far been unsuccessful.

Younger men who have been ruled unfit to fight have also joined Mr Taran's unit. 

Estimates by the UK's minister for the armed forces say 450,000 Russian military personnel have been killed or wounded in Ukraine.

Leo Docherty told the UK Defence Journal that in addition to those killed, tens of thousands of people have deserted the Russian military since the start of the war in February 2022.

He said he did not know the number of personnel that were killed serving in Russian private military companies like the Wagner Group.

Turning his attention to estimates on weapons, Mr Docherty said over 10,000 Russian armoured vehicles, including nearly 3,000 main battle tanks, 109 fixed wing aircraft, 136 helicopters, 346 unmanned aerial vehicles, 23 naval vessels of all classes, and over 1,500 artillery systems have been destroyed, abandoned or captured by Ukraine in over two years.

The bodies of two people have been discovered in the Tisa River near Ukraine's border with Romania, Ukraine's state border guard reported. 

"Despite the lowering of the water level in the Tisa, it is extremely dangerous to swim across it, especially at night," a statement by the border guard said.

"Sharp stones, roots, tree debris, and the swift and cold stream can pose danger to life and health."

The identities of the individuals are yet to be released. 

Since the beginning of the war in Ukraine, a total of 24 people have died trying to cross the river, according to the border guard. 

Law enforcement agencies have uncovered nearly 400 criminal networks that help individuals evade military service by helping them flee abroad, according to Andriy Demchenko, a spokesperson for the state border guard service.

Russian troops have taken over the village of Novobakhmutivka in Ukraine's Donetsk region, according to the Interfax news agency - citing Russia's defence ministry.

The village is close to the town of Ocheretyne which has become a focal point for fighting in recent days. 

Russian forces are also reported to have repelled a series of counterattacks from the Ukrainians near Chasiv Yar, Interfax reported the ministry saying.

This is another key point in the Donetsk region - lying less than 10km from the occupied city of Bakhmut - where the two sides have clashed repeatedly.

Russia's Immortal Regiment March - which takes place on Victory Day to celebrate the defeat of Nazi Germany during the Second World War - has been cancelled for the second year in a row. 

Due to take place on 9 May, the march usually sees thousands take to the streets with photographs of veterans, the UK's Ministry of Defence said. 

But this year the photographs will be displayed in cars and public locations from 1-11 May.

Victory Day parades in five Russian regions will also not go ahead due to security concerns, according to the MoD.

The regions of Bryansk, Pskov, Ryazan, Kursk and Belgorod are all in western Russia and are deemed vulnerable to Ukrainian uncrewed aerial vehicle (UAV) strikes.

The parade was cancelled last year due to a  UAV attack on the Kremlin .

On 7 May, a few days before the parade was scheduled to take place, the presidential inauguration of Vladimir Putin will be held in Moscow.

The MoD said the event may prompt protests.

Russian officials have this morning threatened the West with a "severe" response if frozen Russian assets are confiscated.

Russian Foreign Ministry spokeswoman Maria Zakharova added Russia would never give up territories seized from Ukraine in exchange for the return of frozen assets.

"Our motherland is not for sale," Ms Zakharova wrote on the Telegram messaging app. 

"All Russian assets must remain untouched because otherwise there will be a severe response to Western thievery. 

"Many in the West have already understood this. Alas, not everyone." 

Kremlin spokesperson Dmitry Peskov added that there was lots of Western money that could be targeted in countermeasures put in place by Moscow. 

What assets have been frozen, and why sieze them now?

Today's comments from the Kremlin are the latest in a back-and-forth between Russia and the West after the US House of Representatives passed a bill allowing the Biden administration to confiscate Russian assets held in American banks and transfer them to Ukraine.

The assets - worth around $300bn - were frozen at the beginning of the war in Ukraine, as were transactions with Russia's central bank and finance ministry.

So far EU countries and the US have held off confiscating the assets for fears it could escalate tensions - or cause other countries like China and Saudi Arabia to fear for their own European assets.

Ukraine is very likely to stabilise the frontlines in the coming months, with the possibility of starting a counteroffensive later this year.

According to analysts from think tank, Institute for the Study of War (ISW), Russian forces are suffering from widespread tactical failures.

As long as the Russian military continues with these struggles, Ukrainian forces will be able to exploit them, especially with the help of military aid from the US.

If so, a counteroffensive later this year or early next could be possible, the ISW says.

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