If you have been stressed out and struggling to streamline your finances so that you no longer have to juggle paying bills every week by delaying payments to suppliers, I have a solution for you.
Here’s the thing.
You may be an entrepreneur or a small business owner. If endless cash flow worries are too common for you, I want to introduce you to a cash flow calculator.
But before we proceed, why would you want to listen to me?
I’m a chartered certified accountant, and I help businesses calculate cash flow to improve their finances. I have over 20 years of experience across different sectors. Using my proprietary cash flow maximisation software, I serve my client through my consulting company, Hungry Cash Flow Limited.
Let’s dive in.
What is a cash flow calculator?
A cash flow calculator is a tool to provide a clear snapshot of the company’s cash movements. It considers all cash inflows and outflows in a set time. This lets you see a bird’s eye view of your business’s finances. You can either create a simple spreadsheet template if your business requirements are small or you can use cash flow software to help you save time, hassle and accuracy of data.
From what I have seen with my clients, it is easy for business owners to enter cash flow figures into a tool like this one. They can then use it to understand their cash position without complex calculations.
A Real-life Case Study Dr. James Harlow’s Dental Practice
The Backstory
Dr James Harlow is an ambitious, growth-minded Bristol-based dental practice owner with an annual patient income of £750,000.
The Cash Flow Challenge
Dr. Harlow’s clinic faced mounting cash flow challenges. They had to pay recurring loan and lease payments. They also had to pay for practice purchases and machines. Also, the government imposed a minimum increment in hourly rates in April 2023. Also, rising inflation rates increased the cost of dental products like gloves and clothes. These factors put even more strain on cash flow.
Then he had to do dental chair repairs, which cost £7,729.19. So, he had to dip into overdraft just to keep the show running.
Discovery
Dr Harlow used the cash flow calculator I shared. He used it to record cash in and outflows from private treatments, NHS income, Dental Products sales, and paying staff. He recorded monthly loan and lease repayments and rent.
When the cash flow was calculated, he discovered that he was paying more to dental associates than market rates.
He also discovered that he was paying more for gloves and disposables than he used to pay before.
Action
He negotiated the rate payment with the dental associate. It improved his cash flow net margin by 5%.
He also renegotiated the deal with the supplier to buy gloves and disposables in bulk. This improved his cash margin by 1.7%
The Result:
As a result of using the cash flow calculator, he improved his bottom line profit aka cash left for him by 6.7%.
On a business of £750k, He added £50,250 extra cash to his bank account without doing further treatment work.
You can do the same by following this guide to unlock the cash improvement potential.
By the end of this guide, you will have complete know-how to implement the cash flow calculator tool I will share with you.
Why calculate cash flows?
Did you know?
According to Intuit 38% of small business owners have been unable to pay salaries, loans, or themselves. So, it is important to calculate cash flow no matter what stage, size, sector or specific situation you are in.
From my experience as an accountant, I worked with business owners across various sectors and sizes. You need to calculate cash flow for these reasons.
1. Be The Leader in Your Niche
You may have heard an early bird catches the worm. If you are innovative and can offer something extra or different to your competitors, you have a competitive advantage to capture the market. To do this, you need cash to invest.
Whether you have enough or not to find out, you need to calculate cash flow.
2. Make Informed Financial Decisions Based On Financial Facts
Decision-making without knowing the cash flow data impact is like driving a vehicle to reach the destination without checking fuel. You need to calculate cash to make informed decisions.
3. Secure Loans
Loan providers will scrutinize your cash flow to gauge your business’s health and viability. You demonstrate you are a responsible business owner by showing you are doing regular cash flow calculations.
From my experience, those with a clear pattern of showing cash flow reports will likely secure financing.
4. Increased Peace of Mind:
There is no better feeling than peace of mind. Imagine you don’t have to wake up at 2 am in the morning knowing exactly where you are cash flow-wise.
5. Compare with your budget
When you calculate cash flow often, you can compare it to your cash budget. Then, you can see if you are within budget. From my experience , it is simple for my clients to see if they are on track to meet allocated budget for different areas of the business.
Keeping track of each expense including the tax liability is crucial to maintain a healthy budget and ensure financial stability.
6. Form the basis for cash flow forecasting
Once you have calculated cash flow, it forms the basis for making a cash flow forecast. The forecast uses historical data and future assumptions based on it.
What are the types of cash flow calculators?
Choosing the right cash flow calculator is crucial to manage your business’s finances effectively. Below is an overview of different cash flow calculators. Each serves a distinct financial analysis purpose. Each calculators have different formula to calculate them. I’m not going in detail on this part. You can check out cash flow formula guide for this part.
Let’s break down these types of cash flow calculators briefly:
Net Cash Flow Calculator:
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- Purpose: Provides a clear picture of your business’s overall financial health, showing whether you have enough cash to meet your immediate financial obligations.
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- Ideal For: Any small business owner wanting a simple yet vital metric to track money flow into and out of their business.
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- Use Case: It mainly focused on operating cash flow. It tells, how much net cash you are generating in the business to run your business operations. Mainly success or failure depends on the ability to generate positive net cash flow month to month.
If your primary focus is maintaining short-term liquidity, explore our Net Cash Flow Calculator Detailed Guide [link to your detailed article].
Discounted Cash Flow (DCF) Calculator:
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- Purpose: Helps you evaluate the potential profitability of investments by estimating their future cash flows in today’s value.
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- Ideal For: Businesses considering new projects, acquisitions, or significant equipment purchases.
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- Use Case: Determine the fair value of a business, whether you’re looking to buy an existing operation or planning to sell your own.
Learn More: Explore our in-depth guide to Discounted Cash Flow Calculator [Link]
Free Cash Flow Model Calculator:
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- Purpose: Helps you determine how much cash your business generates after funding operations and maintaining its assets. This reveals the cash available for growth initiatives, debt repayment, or dividends.
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- Ideal For: Businesses seeking to expand, attract investors, or evaluate their overall financial health and flexibility.
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- Use Case: Assess your financial capacity for a significant investment that could accelerate your business growth, such as expanding your team or upgrading technology.
Learn More: Discover the power of Free Cash Flow calculator in our detailed guide [Link]
Investing Cash Flow Calculator:
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- Purpose: Helps you track cash flow related to your business’s investments, such as purchasing equipment, buying or selling securities, or investing in other companies.
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- Ideal For: Businesses with significant investments or those actively managing an investment portfolio for optimal returns.
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- Use Case: Evaluate the financial impact of a major renovation project, the purchase of new equipment, or even the acquisition of a smaller competitor.
Learn More: Uncover strategies for maximizing your investment returns with our Investing Cash Flow Calculator guide[Link]
Financing Cash Flow Calculator:
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- Purpose: Helps you track the flow of cash related to your business’s financing activities, including debt, equity, and dividend payments.
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- Ideal For: Businesses actively managing their debt levels, seeking funding, or considering how to return value to shareholders.
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- Use Case: Thoroughly assess your ability to take on new debt, such as a bank loan or overdraft facility, by modeling different repayment scenarios and interest rate fluctuations.
Discover ways to optimize your financing with our Financing Cash Flow calculator guide [Link].
Selecting the Right Calculator
Choosing the appropriate calculator depends on your business needs, the financial metrics you wish to analyze, and the decisions you intend to make based on this analysis.
Some businesses might need a simple net cash flow calculation. Others need the in-depth analysis of a DCF or FCF model. Assess your business’s financial activities and objectives to select the most suitable calculator.
If you need my help selecting the right calculator, you can book a call with me.
What Are The Components of a Cash Flow Calculator?
You need to be aware of the components of a cash flow calculator.
CFO (Cash Flow from Operating Activities)
CFO (Cash Flow from Operating Activities) is the cash flow generated from your operations. This means that cash is produced by collecting money from sales, which is kept in the business after paying for costs and expenses. It is the primary source of cash flow in the industry.
Under CFO, you will have two types.
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- Cash inflow
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- Cash Outflow
Cash inflow examples are:
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- Cash received from customers
Cash outflow examples are:
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- Rent
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- Advertising.
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- Lease payments
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- Salaries
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- Travel
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- Office Expenses
CFI (Cash Flow From Investing Activities)
CFI (Cash Flow From Investing Activities) refers to the cash flow generated from investing activities.
Under CFI, you sell the investments to generate cash, and the business invests cash. So the total change in cash flow is called Cash flow from investing activities.
CFI cash inflow examples are:
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- Sale of property
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- Sales of investment in a business
CFI cash outflow examples are:
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- Inventory- Total cash paid for the period to purchase inventory.
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- Capital expenditures Cash used to purchase capital equipment or land for use in your business.
CFF (Cash Flow from Financing Activities)
CFF is cash flow from financing. It comes from financing activities. This shows how the business is funded using external sources.That could be from banks and angel investors, and if you put money in the business, that’s external funding, too, because you are not your business.
CFF inflow examples are :
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- Capital contributions- Any cash received from the owner(s) for the period.
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- Stock issuing -Net cash received from issuing stock. Make sure this is the net amount after any fees have been taken into account.
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- Bank Loans
CFF Cash outflow examples are:
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- Interest paid- interest expenses you paid during this period
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- New borrowing- Net new borrowing for the period. Include new borrowing as well as the net increase in any line of credit borrowing.
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- Loan repayments- Total loan principal repayments for the period. Do not include interest. Interest is included in the operating expenses of the cash flow statement.
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- Dividends paid- Any cash dividends paid for the period.
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- Shares buyback- Buying back share holding from other shareholder or investor
How do you use cash flow calculator?
There are four steps to use this cash flow calculator.
Watch this video to look over my shoulder at how I use this tool.
Step #1: Starting Cash
You take the opening cash balance from your bank balance and place in the starting cash balance box.
Step #2: Cash Inflows
You record the cash inflows across three components – CFO/CFI/CFF
Step #3: Cash Outflows
You record the cash outflows across three components – CFO/CFI/CFF
Step #4: Calculation
the net figure of CFO/CFI/CFF plus the opening balance is your closing cash balance .
EXAMPLE OF USING CASH FLOW CALCULATOR
Here’s an example of what a finished cash flow calculator looks like:
In this example, it tell me..
FAQ's
Disclaimer
This cash flow calculator is for general information. It is for understanding how to calculate cash flow. You should not base your cash flow decisions based solely on this calculator. Shishir recommends you always seek detailed professional advice from a cash flow expert or your accountant that is customised to your situation.
Cash Flow Calculator Definitions
In order to use the calculator, you need to be aware of the terms used.
Opening Balance
Total cash available at the beginning of the period.
Closing Balance
Total cash remaining at the end of the period.
Cash inflow
Cash inflow refers to the money coming into a business. It typically includes revenues, such as sales income, interest earned, dividends received, or loans obtained.
Cash Outflow
Cash outflow refers to the money leaving a business or individual. It includes salaries, rent, utilities, and raw materials. It also includes taxes, loan repayments, and other costs. These costs are for running a business or maintaining personal finances.
Net Cash Flow
Net cash is the difference between total cash inflows and total cash outflows during a specific period. It represents the overall change in cash position over that time frame.
