Updated: March 26, 2020
As an entrepreneur, one of the first technical skills I learned was analyzing my business cash flow.
Today, we’ll learn how using a cash flow template can help not just save time, but make it easier to see if the business is doing good.
Mitchell has the floor today, let’s read his words below.
First time small-business owners don’t have the time to draft up every document they need.
You’re going to have your hands full just filling in your cash flow paperwork, so why would you waste your time reinventing the wheel? There are plenty of great cash flow templates online to do that job for you.
However, there are some hidden perks to working with a cash flow template that you might not have expected when you started using them. Looking beyond the fact that human error is less of a factor, you get these three great perks as well.
You Can Spot Unstable Bookkeeping
If you’re not a natural accountant, bookkeeping can come as a challenge to you. You might even pass that duty off to a cofounder or hire an accountant if it really bothers you.
The problem for a lay person is that it can be very difficult to fact check a bookkeeper if you don’t know how to keep books yourself. However, by laying everything out in a cash flow format, you can see when bills are being paid and when you’re receiving money down to the day.
If your accountant (or yourself) is making any unusual entries into the books, they should show up on these statements. This is an easy and no blame way to find potential discrepancies and clear them up before they morph into a big problem for you and your company.
It Makes It Easier to Break Down Individual Accounts
If you’re having cash flow problems, one of the first things you should do is break down your expenses per account versus the money that you make, according to Inc.com. Once you do that you can see where your money is tied up.
Do you spend too long waiting for them to pay you? Does the product spend time in shipping before their payment goes through, or is there a delay between you receiving their money and you expending your cash on the service provided?
This can make it seem like you regularly have more money than you do. Start with your largest, most profitable transactions and break down the cash flow individually from there.
If you’re using a cash flow template, you’ll find all the relevant information is neatly organized, and you can find another, more specific template (or just print out another copy) where you can fill in the details of one account at a time until you find the source of your cash flow problem.
Showcase the Difference Between Profit and Positive Cash Flow
Making a profit overall isn’t going to help you if you’re having trouble scraping together enough cash to have the lights turn on at a certain time of the month. This is especially true at the start of a business, according to SmallBusiness.Chron.com.
When you first start up, you haven’t built up enough of a cushion to cover lean months or late payments yet. Cash flow is essential during a business’ first months, and remains a primary factor for the first three years.
It never becomes unimportant, but after three years a successful business should be able to cover the occasional cash flow issue.
You can always get more value out of things if you put your mind to it. Not only do cash flow templates save you the time and effort of trying to create your own method of bookkeeping, they’re an invaluable resource for other aspects of the business as well.
With something as critical to business success as cash flow you don’t want to wait for there to be an obvious problem to investigate. The standardized forms make it easier to spot a human mistake in the records, and make finding your individual account records a snap.
This article is contributed by Mitchell Sanders, an accountant from Canada