How To Track Your Small Business Cash Flow (2024)

FAQs

How To Track Your Small Business Cash Flow? ›

Use accounting software or spreadsheets to keep accurate records and categorize your income sources. Monitor Cash Outflows: Keep a close eye on your expenses, including rent, payroll, utilities, inventory, and other costs. Categorize expenses to identify areas where you can cut costs or optimize spending.

Creating a cash flow spreadsheet

You can use tools like Excel or Google Sheets to develop a template that suits your business's needs. Include columns for cash inflows, cash outflows, and balances. Regularly update this spreadsheet with the latest financial data to maintain an accurate cash flow record.

Net cash flow = Total cash inflows − Total cash outflows

For example, if your company has $250,000 cash inflow and $150,000 cash outflow, the calculation would be as follows: $250,000 (cash inflow) − $150,000 (cash outflow) = $100,000 (net cash flow).

Record your cash sales in your sales journal as a credit and in your cash receipts journal as a debit. Keep in mind that your entries will vary if you offer store credit or if customers use a combination of payment methods (e.g., part cash and credit).

You can see money in and money out, spot trends, and look at historical data with QuickBooks Money and QuickBooks Online. However, with QuickBooks Online, you can also see cash flow projections for the next 90 days and get personalized, predictive insights and recommendations.

Tools for Tracking Cash Flow

Cash Flow Templates: Excel or Google Sheets offer pre-designed cash flow templates that you can customize for your business. These templates provide a structured format to track inflows, outflows, and calculate net cash flow.

Cash balances vary widely by industry: In the Personal Services industry, the median small business held a cash balance of $5,300. In the High-Tech Manufacturing industry, the median small business held a cash balance of $34,200.

Typically, a business should have a cash buffer of three to six months' worth of operating expenses — the regular day-to-day costs of running a business. However, this amount depends on many factors: the industry, what stage the company is in, its goals, and access to funding.

What do I need to keep track of for my small business? ›

Purchases, sales, payroll, and other transactions you have in your business will generate supporting documents. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books.

Anyone can determine their cash flow by creating a budget. All you need to do is write down your monthly income, including sources of passive income, and then subtract all your expenses. Instead of focusing on a single month, you may want to track your expenses for three months.

The balance sheet shows a snapshot of the assets and liabilities for the period, but it does not show the company's activity during the period, such as revenue, expenses, nor the amount of cash spent. The cash activities are instead, recorded on the cash flow statement.

A cash flow statement tells you how much cash is entering and leaving your business in a given period. Along with balance sheets and income statements, it's one of the three most important financial statements for managing your small business accounting and making sure you have enough cash to keep operating.

Generally speaking, FCF is the flow of money through the business, minus capital expenditures (equipment, mortgages, etc.). It's a straightforward calculation: take earnings before interest and tax (EBIT) and then subtract capital and related expenditures.

The Cash Flow Statement. A cash flow statement is the financial document that presents income actually received and expenses actually paid. This statement (usually modified for a small business) generally shows beginning cash balances, cash inflows, cash outflows, and ending cash balances.

Project your cash flow by estimating your sales, determining when you can expect payments, and estimating all expenses (fixed and variable). This system can give you a figure to aim for as you build a cash reserve. Once you know how much cash you need in your reserves, you can begin building an emergency fund.