05 Easy steps to create a business cash flow plan

Considered one of the most important management tools, corporate cash flow is an indispensable financial management tool to ensure the economic sustainability of businesses.

In essence, it refers to the business's cash inflows and outflows. Therefore, knowing how to predict the amounts that enter and exit the cash register might help in the development of better strategies.

To help you with this task, we have prepared this step-by-step guide on how to design a cash flow:

1. Check your available cash balance
2. List all current fixed and variable expenses
3. Describe all your sources of income
4. Find out what your average payment and receipt times are
5. Estimate future income and expenses

Continue reading and check out some tips on how to correctly analyze your cash flow .

Step by step

As we mentioned, cash flow is a tool that allows you to monitor all of a company's financial movements.

The cash flow projection, in turn, is nothing more than an estimate of the amount of money that will enter and leave the company during a given period.

This practice guides the financial manager's decision-making , who is able to better distribute resources and define strategies with greater assertiveness.

Check out the step-by-step guide on how to design a company's cash flow in the following lines.

Step 1 – Check your available cash balance

The first step in projecting cash flow is to know how much cash the company has available right now.

Step 2 – List all current fixed and variable expenses

The next step is to make a list of all the current fixed and variable expenses of the business. Put otherwise, describe the source and amount of each spend.

Step 3 – List all of your revenue sources.

You must also include all of your company's revenue streams in order to predict cash flow. Stated differently, all cash inflows are included in this step.

Step 4 – Find out what your average payment and receipt times are

The Average Payment and Receipt Periods must be specified in this step of the cash flow design process for a business. The second refers to the time frame for actually receiving the value of a particular sale, whereas the first refers to the time frame for paying suppliers.

Step 5: Project future earnings and outlays

Based on the information gathered in the previous steps, it is possible to make a realistic estimate of all future cash inflows and outflows.

By assessing deadlines, it is possible to accurately measure both your future inputs and outputs.

04 suggestions for cash flow analysis

Now that you know the steps for cash flow projection , see below 4 essential tips on how to analyze a cash flow.

1. Use concrete data

The first step in analyzing cash flow correctly is to base it on concrete data. To do this, use the results of key performance indicators , previous reports and income statements.

Based on this historical data, it will be possible to identify trends and make more realistic and assertive analyses.

2. Avoid mixing personal and company accounts

A common mistake that can harm cash flow analysis is mixing personal accounts with the company's account .

It is extremely important to know how to make this separation to prevent certain expenses and income from being recorded incorrectly.

3. Keep data up to date

Data relating to the company's cash inflows and outflows must be constantly updated. Otherwise, there may be discrepancies that could compromise the correct analysis of cash flow .

Constant updating helps in identifying risks and opportunities and in decision making.

4. Compare the cash flow projection with the results achieved

Part of the cash flow analysis involves comparing the results achieved with those predicted in the projection. By doing so, it is possible to make the necessary adjustments to ensure that income and expenses remain within expectations.

Is it clear how to design a cash flow? Put our step-by-step guide and tips into practice and have more control over your company's cash flow .

Setting is a consulting company focused on excellence and the exchange of knowledge with transparency, thus delivering value and results for your company.

To do this, it uses a systemic methodology, based on facts.

Check out some of our specialties:

• Formulation and implementation of strategies;
• Performance analysis;
• Structuring the governance model;
• Risk management;
• Compliance;
• Process mapping and modeling;
• Design and implementation of new processes;
• Management, standardization and control of processes;
• Analysis of the organizational structure;
• Structuring the management model.