This section shows the general steps you should take to track cashflow. 
 

Combine your forecasts for cash in and cash out on a separate worksheet spanning a one year planning period.  Subtract cash out from cash in to give the net cashflow on a separate line.  Spreadsheet software calculates the monthly totals automatically, so you can see the net cashflow at a glance with every change.  
 

Where the cashflow shows a negative figure, some adjustment and action is needed - while you still have time to act.  If the business idea is not viable with the current costs, volumes and prices, what improvements can you make?

Do a reality check - are the projected sales achievable?  Have all the costs been identified and are any estimated figures accurate?  Have you included a sum for unexpected additional items?  You may be able to arrange a loan or overdraft facility to cover a temporary shortfall.  Include the repayments in the cash out figures to see if you can afford it. 

Use the cashflow forecast as a tool to compare different courses of action. 

 

When you are happy with the cashflow forecast, save it in a 'Cashflow' folder on your PC and review it every week or month.  Compare the actual cash going in and out in the last period with the plan to see how accurate the forecast has been.  Replace the forecast figures with the 'actuals' and see how this changes the future cashflows.  Does it now show any danger signs, or is everything on track?  Do you need to take any action to avert a cashflow crisis?  Can you see any trends emerging that could affect your business plans?

Increasing cash coming in normally means improving the profitability of your sales.  One way is to increase volume of sales.  However beware that increasing sales and marketing activity in order to find new customers also has a cost.   A spreadsheet can be used to calculate and compare the costs involved in different strategies, such as: a mailshot campaign; more customer visits; advertising in a popular trade journal; or taking a stand at an exhibition.  Include the cost of people's time in your calculations. 

You can discuss with a Business Adviser what type of sales drive could be most effective.  They could also help you explore different ways to increase the value of each sale.

Reducing the cash going out means lowering your costs.  Research the Internet to find out about best practice in your industry (see the Links page).  Improving quality and getting it 'right first time' reduces returns, rework and therefore your costs.  Business advisers can offer help on all aspects of business operations. 
 

An environmental assessment could help you identify ways to eliminate waste and reduce consumption, with cost benefits.  And, have you thought about ways that ICT can streamline your operations to reduce costs, add value and increase profitability?