What is cash flow?

A cash budget provides an overview of cash inflows and outflows during a specified period of time. This is often called the cash flow. Just as cash flow is one of the most critical elements of a successful business, the cash flow projection or table is one of the most critical elements of a business plan. See how to calculate your cash flow using our cash flow calculators.


How cash flow affects your business

Managing the cash flow in your business is critical. Tim Berry, leading business planning authority, states "The single most important analysis in a business plan is a cash flow plan, because cash is the most critical element in business." You will use cash to cover operating expenses, buy equipment, pay salaries and all the other things associated with operating a business. It's very easy to get cash and profit mixed up. As Tim Berry explains, "cash flow is important because it is both vital to a company and hard to follow. Cash is usually misidentified as profits. They are, however, very different. Profits don't guarantee cash in the bank. Lots of profitable companies go under because of insufficient cash, as when waiting for customers to pay invoices. It just isn't intuitive."


Cash flow forecasting and cash flow budget

Cash flow forecasting is the process of estimating how much cash will come in and go out of your company in a given time period. This isn't an exact science - it relies on educated guessing. When creating your business plan, you are planning your business into the future. The detail you put into your plan may be based on research, past trends, and competitor analysis, all of which give you a sound basis to make an educated guess. But it's still a guess.

There are lots of different terms you will come across when doing your research on cash flow. A cash flow budget is the same as cash flow. You will hear cash flow budget, cash flow statement, cash flow projections, cash flow spreadsheet used interchangeable.


Cash flow help

Creating a cash flow statement can be difficult if you don't know where to start. We have three great resources which will help you on your way. The first is a sample cash flow statement where you can see a real life cash flow spreadsheet. The second is a cash flow template. Just input your email address and we'll send you a customizable blank cash flow template in Excel format. And the third is cash flow software called Business Plan Pro, which not only has over 500 sample cash flows included, it also has wizards to help you through creating your own cash