Cashflow

Cashflow

Formally known as Financial Capability Week – Talk Money Week encourages us all to talk openly about MONEY.

On behalf of the Female Success Network, I would like to spend this week giving startups some of my thoughts on financial matters when it comes to developing a new business.

Disclaimer: This post is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial professional to determine what may be best for your individual needs.

Today I would like to demystify “Cashflow” in its basic form for UK startups.

Understanding cash-flow is absolutely crucial to ensuring that your business is sustainable! Creating a forecast will help you plan for the future.

Step 1 – Create a sales forecast spreadsheet:

Months along the top
Products and services listed one by one down the left-hand side
Other Inflow cash under the products as and services (Grants, Investments etc)

You can then populate this spreadsheet with the inflow to your business predicted for each month for each different product/service.

How do you predict this?

For a business with any service history – look at trends, what are your previous sales?

For a start-up business, take into consideration Market Research (What is popular amongst your audience) and seasonality. Looking at what is likely to sell more at different times of the year – look at your planned launches etc as well.

Bare in mind as a start up business this isn’t an exact science, use this as a living breathing document that will need updating regularly.

Step 2 – Calculate your gross profit.

The cost of your product/service is one thing, but your profit is something entirely different!

How much does it cost you to make the sale? (Time and Advertising?)
How much does it cost to fulfil the sale? (Team, Materials, Freelancers, Manufacturing, Postage etc)

Minus your costs from your sales and that is your actual profit.

Step 3 – Calculate your overheads and expenses.

*Tax
*VAT if applicable
*Office Space
*An Accountant
*Mentorship
*Employees/Freelancers
*Software costs
*Website hosting
*Equipment
*Travel Costs

This is not an exhausted list, really give thought to what you pay out for.

Add all of this information below your inflow in your spreadsheet – remember to add all of the overheads on the months that you pay out for them.

You should now be able to see:

Sales
Profit
Outflow/Expenses

Step 4 – Finalise the figures

Add yourself a new line in your spreadsheet for your net figures. Combine your cash in, followed by adding up your cash out showing you whether you are making more than you spend, or that you are spending more than you make!

Finally, add two more lines to the spreadsheet to update monthly:

Bank Account Starting Balance
Bank Account Closing Balance

If your balance is increasing, you may be looking at a healthy position for expansion. If you are decreasing you need to make cuts on your expenditure or increase your prices!

Here is an example of what your spreadsheet should look like –

Happy Tracking!

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