How to Build a Monthly Cash Flow Statement Template for Business Use

The cash flow statement is a financial statement that provides an inflow and outflow of cash of the business over a given period. It represents the figures remaining in your bank account after paying for all the business expenses and etc.

Relevance of Cash Flow Template to Business

For a business to survive, the business must generate adequate cash to pay its operational expenses, pay for capital expenditures and service its financial debt.Cash flow planning is key for for every business and many businesses wish to obtain better visibility over the near-term cash flow forecast which usually is one year. This reflects an operational point of view and businesses will require to track their cash available in very detail. Creating a monthly cash flow statement template will allow to track cash flows on a monthly basis and to avoid unnecessary surprises at the end of the year. It informs the reader of the business cash position and deviations between actual and budgeted figures. A strong budgeting process including not only profit but also templates to plan for cash flows will help you assess your spending pattern and best prepare you to plan your business’s liquidity adequately.

Building a Monthly Cash Flow Statement Template

Cash flow is typically done using a 12-month projection, which allows you to set up your budget depends on your business requirement. If you are a start-up business, then just use a simple forecast of how much cash you want to expect over 12 months. While if you are in business for a while, then you can use the previous year’s figures of your transactions to start with. Then start by plotting your forecasted revenue and expenses for 12 months. This should be your base in building your monthly cash flow template.

A Cash Flow Statement has three components, which includes cash flow from operations, investing, and financing.

• Cash Flow from Operating Activities is basically operating income plus non-cash expenses. Generally, non-cash expenses should be added back to income because it does not represent an outflow of cash; thus, depreciation and amortization are added to income for purposes of cash flow calculation.

• Cash Flow from Investing Activities would include the outflow of cash for long term investments like purchase of equipment while an inflow would consist of sale of asset or investment securities

• Cash Flow from Investing Activities would include the outflow of cash for long term investments like purchase of equipment while an inflow would consist of sale of asset or investment securities

For this to work, the prerequisite is a budget template for profit & losses, since our cash flow statement will require the forecast of Net Income. Certain positions such as Net Working Capital items will also require monthly forecasts of Balance Sheet positions in order to calculate the required change in Net Working Capital.

Below is a standard format of a monthly cash flow statement template, and what you would have to do is add additional columns for 12 months.

Conclusion: Monthly Cash Flow Help Businesses Plan Ahead

A monthly cash flow statement template will help to track cash flows on a monthly basis and lead to a detailed cash flow plan for the full year. In addition to the normal budget, which focuses on budgeting income and expenses ahead of time, a monthly cash flow statement also includes the effect from capital expenditures, changes in net working capital and effects from financing cash flows related to debt, equity or dividends. It therefore gives you a more precise view of the cash position than a normal budget is able to do (since a normal budget focuses on budgeting for profits and not for cash flows).

Especially in times where liquidity planning is key, a thorough understanding of your cash flows gives you a good tool at hand to plan for contingencies. Cash deviations in your cash flows can be quickly analyzed vs. the plan and the cash flow forecast can stay up to date.