Introduction To Cash Flow Template
From my experience of working with my clients doing revenue ranging from £40k to £53.8m based in the UK over the last two decades as their trusted accountant, I am sharing comprehensive information about the importance of a cash flow template for a small business owner.
First, I will share the benefits of how some of my clients are cutting 75% of their time and effort to prepare cash flow reports by using various types of cash flow templates for specific purposes.
Then, I will share different types of cash flow templates for specific goals.
Furthermore, I will share with you step-by-step instructions on creating a cash flow template over the shoulder, along with common mistakes most small business owners make during the process.
Before going forward, why would you listen to me?
As a cash flow specialist for the last two decades, I have helped hundreds of clients build customized templates for their specific cash flow needs. I have been featured on this topic in major sites like QuickBooks Online, Independent, Zoho, and Floatapp.
I review my client’s cash flow statements and devise a plan of action to fuel long-term growth. I do this all day, every day, for a living. So, don’t worry. You are in safe hands.
Whether you sell a product to a customer or provide a service, by the end of this guide, you will have comprehensive information you need to know about cash flow templates as a small business owner.
Let’s dive in.
Key Takeaways
- Efficiency and Accuracy: From the internal data I have collected over the years cash flow templates are a real efficiency booster, cutting down 75% of the time spent on financial reporting. They also significantly reduce errors. For any business owner, this means more time to focus on core business activities and less worry about the nitty-gritty of financial tracking.
- Informed Financial Decisions: These templates offer a clear, visual snapshot of your financial health. They enable you, as a business owner, to make proactive, data-driven decisions. This is crucial for managing your cash flow effectively and ensuring your business remains financially healthy and agile.
- Customized Financial Management: The diverse range of cash flow templates available means that there’s something for every stage and size of business, as well as for different industry requirements. This customization allows you to align the template closely with your business’s specific financial needs, enhancing its utility and relevance in your strategic planning.
What is a Cash Flow Template?
A cash flow template is a spreadsheet where you put cash flow data of cash in and out to prepare different types of cash flow reports.
It’s a document you can visualize your cash position to track your financial health.
Why is a cash flow template important?
Look, we both know managing cash flow is essential to your business’s success, right?
So here’s the thing,
Without a cash flow template, you cannot prepare cash flow statements, and without preparing cash flow statements, you cannot manage cash flow effectively and efficiently.
Furthermore, using cash flow templates, you can:
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- Speed up preparing cash flow reports
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- Reduces the risk of errors by not keeping on changing formulas and thus improves the accuracy of figures
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- Maintaining and updating the reports easily
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- Reduces reliance on a particular individual, like an accountant, to update cash flow reports in a timely manner.
What Are The Benefits of using a cash flow template ?
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- Helps you systemise and streamline the process of having access to the cash flow statements on a real-time basis so that you can get a complete grip on your finances
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- Helps you to avoid cash flow issues before they arise by proactively making money decisions
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- It helps you make data-driven financial decisions by providing financial data visually.
What Are The Different Types of Cash Flow Templates ?
From my experience working with clients who are small business owners based in the UK, I have frequently used nine types of cash flow templates.
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- Cash Flow Statement Template
- Cash Flow Forecast Template
- Cash Flow Projection Template
- Discounted cash flow Template
- Cash Flow Planning Template
- Cash Flow Budget Template
- Free Cash Flow Template
- Cash Flow Analysis Template
- Cash Flow Metrics Template
These cash flow templates serve specific purposes of looking at different aspects of cash flow.
Let’s go through them one by one.
1. Cash Flow statement template
The Cash Flow statement template is the most widely used cash flow management tool. Using this template, you record cash receipts that have happened in the business in a certain time period. A statement of cash flow is used to measure your financial performance and determine your company’s liquidity status.
Cash Flow statement is like a mark sheet, which records your PAST (What has happened) and PRESENT(What is happening) actual performance – Shishir Khadka
2. Cash Flow Forecasting Template
The cash flow forecasting template is essential to figure out your immediate funding needs to ensure you have enough working capital to pay your lenders, suppliers, staff salaries, and credit repayments.
3. Cash Flow Projection Template
The cash flow projections template is a bit complicated to prepare as it takes accounts from the income statement and balance sheet in a specific time period. The cash flow projection template provides more long-term financial planning, like future business acquisition. This is something you would consult with your advisor, such as an accountant or a cash flow expert.
4. Discounted Cash Flow Template
The discounted cash flow template helps you calculate a business’s net present value ( NPV) if you consider buying or selling. It is used for business valuation purposes.
5. Cash Flow Planning Template
A cash flow planning template allows you to make or validate your business plan for specific purposes like :
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- launching a product and seeing the impact on the overall business
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- launching a marketing campaign and seeing the impact of overall revenue line items while controlling operating expenses on a periodic basis.
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- hiring an employee and seeing the impact of employment on the overall growth of the business
It allows you to make strategic business decisions supported by cash flow viability.
6. Cash Flow Budget Template
From what I have seen over the years, most clients prepare a cash flow budget at the beginning of January, regardless of when their financial year ends.
You simply copy the last 12 months’ profit and loss statement into the new calendar year and make adjustments by 10%-15% plus or minus as you see fit.
Here’s a tutorial video of how it’s done using QuickBooks Online. Then, create a quick, simple cash flow statement on a monthly basis using this cash flow template. Free Download
7. Free Cash Flow Template
Free Cash Flow Template to identify excess cash either to reinvest in business operating activities or financing activities such as distributing dividends to the equity shareholders, and repaying loans in full to creditors.
8. Cash Flow Analysis Template
Cash Flow Analysis Template is used to identify trends, spikes and patterns of your cash inflow and outflow. It helps you prepare a report identifying cash flow gaps and resource utilisation across different business areas.
9. Cash Flow Metrics Template
Cash Flow Metrics Template measures the key figures that matter either to save money or make money. How much money are you making or spending in a specific period?
Here’s what you need to know next.
So, based on your current needs, you can go deeper into one of the cash flow templates above, so that you are not stuck in cash flow analysis paralysis.
What Are The Key Elements of a Cash Flow Template?
To prepare a cash flow template, there are key elements you need to include from the financial statements. Some of the items will be taken from the profit and loss statement, and some items from the balance sheet.
Here are the items you should include:
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- Sales Revenue: This is taken from the income statement. This section enables you to record the inflow of cash from sales.
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- Overhead Expenses: This is also taken from the income statement. These include costs mainly fixed costs such as rent, utilities, salaries, and marketing expenses.
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- Accounts Receivable: Accounts receivable represent the money that your customers owe you for products or services they have already received. You need to track accounts receivable to collect the money on time.
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- Accounts Payable: Accounts payable refers to the money you owe to suppliers. You need to track it to identify whether you have enough funds to pay your bills on time.
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- Taxes– There are mainly four types of taxes you need to include- VAT if you are running a VAT-registered business, corporation tax, PAYE/NI and pensions.
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- Capital Expenditures: Capital expenditures are a part of investing activities. You need to keep track of your fixed assets, such as plant and machinery, office equipment, and motor vehicles, to record how much cash is tied up in capital expenditures. You can see an example of tracking expenditures.
By including these key elements in your cash flow template, you can understand your business’s financial position and make informed decisions to drive its growth and profitability.
What Are The Factors to consider when choosing a template?
1. Stage Of Your Business
From what I have seen, the stage of the business affects choosing the cash flow template.
If you are a new business, you do not have historical documents to compare to.
In this case, any type of cash flow template will work for you. You just need to make sure to create a simple, customizable template to track the financial health of your business.
You can include things like:
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- Recording invoices sent and then subsequently cash receipts from your clients or customers.
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- Tax refunds, as in the early stage, will hardly be any taxes to pay, and instead, there will be some form of tax claims in the form of grants.
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- Also, record cash payments to vendors.
This combination of tracking incoming and outgoing cash records your actual cash flow.
If you are an established business, then you have historical financial transactions to compare current actual cash flow vs the previous year’s cash flow in a specific period. You can easily measure the financial performance.
You can do things like
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- Take into account seasonal trend
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- Take into account of one-time cost
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- Build typical scenarios taking into account key assumptions considering upcoming costs and sales figures to establish future cash flow. And whether it will be enough to cover financial liabilities or not.
2. Size Of Your Business
If you are a small business with less than £85k a year in sales revenue, your cash flow statement will look pretty much like a profit and loss statement. as you will be accounting for income statements on a cash basis. So you do not need to prepare a statement of cash flows.
However, if you start going above this threshold of £85k for VAT purposes, it makes sense to prepare a separate cash flow statement and the profit and loss statement.
Why?
You know an invoice is recorded in the income statement regardless of whether it is paid or not. At the same time, the invoice is included in the cash flow statement only when cash is received from the invoice. You have the option to opt for cash VAT or accrual VAT up to £1.35m over the period of 12 months.
So, for cash flow clarity purposes, I recommend you prepare a cash flow statement to review the business from a cash point of view.
3. Sector You Are In
In some sectors, it is highly unpredictable to do a cash flow forecast, whereas, in some sectors, the business is stable as they are doing the same level of revenue, buying the same level of inventories, etc., year on year.
For example, I work with an art gallery. It is very difficult to prepare a cash flow forecast as the inventory the gallery may purchase can be worth millions vs inventory buying for a few thousand pounds.
To tackle this, I recommend you use to choose the right frequency for preparing cash flow templates.
Weekly- When there is so much cash flow volatility
Monthly- If the business makes periodic one-off big investments
Quarterly- if the business is more stable. i.e., a similar amount of net cash flow the company has.
Having said this, every business is unique in its own way. You need to customise the cashflow template to suit your specific needs.
4. Level Of Detail Required
When you need the level of detail required, then you can break down the cash flow template into :
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- Top Accounts: This means the main cash inflow and outflow categories- for example, expenses such as premises.
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- Detailed Accounts: This is where you include not only top accounts but also subaccounts for example- expenses rent, rates, repairs, utilities under premises.
How to Create a Custom Cash Flow Template (step by step ) by Shishir Khadka
If you struggle to capture all cash coming in and going out in one place and fail to get a bird’s eye view of your cash flow, then you’ll find this step-by-step process useful.
I use this exact process to help my clients with a revenue range of £40k to £53.8m prepare a monthly cash flow statement for their business.
Let’s dive in.
Step 1: Export Month-End Bank Transactions Into Excel From Your Bank Account
Download your bank statement as a CSV or Excel file from your online bank account portal. You will see the cash-in and cash-out columns with opening and closing bank balances.
Download data from the banking portal and not from accounting software. In this step, you will rely on the banking portal as an application software.
Why?
Bank transactions are facts that happened in a particular month, whereas the data you pull from your accounting software may have unallocated or misallocated bank account transactions. In other words, there may be bookkeeping mistakes.
Step 2: Organise Cash Inflow By Receipt Types And Post In the Cash Flow Statement Template
Step 3: Organise Cash Outflow By Payment Types And Post It In The Cash Flow Statement Template
Step 4: Post The Opening Bank Balance In The Cash Flow Statement Template And Compare The Closing Bank Balance With The Remaining Cash Balance.
By following these four steps, you can organize your cash flow in one place and have a complete picture of what’s going on with your cash flow, just like in this example.
You can do this in less than 15 minutes without the usual anxiety or hassle of organizing your cash flow.
Once again, here’s the link to download this monthly cash flow statement template and make it your own.
If you need technical support in building a cash flow template, the video below is for you. You can follow it by looking over my shoulder.
How to Use a Cash Flow Template to Make Better Business Decisions?
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- Evaluating business performance based on cash flow
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- Planning for business expansion
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- Identifying areas for cost reduction
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- Evaluating financing options
What Are The Best Practices Advice for using a cash flow template?
From my experience as a cash flow expert over the last two decades, here are the best practices and advice I can offer for using and improving a cash flow template.
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- Keep your template up-to-date.
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- Pay attention to formulas change from input cell
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- Change of variables like base rate change
I remember how many times I had to change the interest base rate for my clients from June 2020 to December 2023 because of interest rate spikes. In this period of time, interest rates spiked 14 times from 0.1% to 5.5%.
I keep the template updated regularly by tracking interest rate changes. I also updated the VAT rate change for the hospitality sector from 12.5% to 20% .
Keep your variables in one tab, like interest rate and VAT rate change. Then, it makes the cash flow template smooth. Otherwise, it will be difficult to track unexpected events easily.
Your Next Step
Whether you’re starting a new or established business, you need to always be on top of cash flow.
It starts with creating a cash flow template to suit your business needs.
Download this free template I use for my clients who are doing revenue ranging from £40k to £53.8m and make it your own.
In the comment section below, let me know what you learned from this guide.
