ESYB2 052 - The Cash Flow Statement
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[00:00:00] With this video, let's start the financial section of our business plan. I know many people are afraid of this section, but I promise it won't be that difficult. There are three major parts of your financial section of your business plan. They are your income statement. That's one, your cash flows. That's two and your balance sheet.

That's three. We're going to cover all of that in a very easy way. I promise it's pretty simple once you get a hang of it. And. In addition to that, I'm going to add a few tidbits here and there just to round out your planning knowledge. So you'll actually get a little bit more than the typical business plan would have, and you may or may not want to include it in your business plan, but.

I recommend that you definitely think through it in your business plan. So let's start with your business plan's first financial item, and I'm going to make that the cash [00:01:00] flows. The reason I'm doing that is because this is the simplest one to make. For cash flow, you have two things. You have two types of documents you can create.

A cash flow statement and a cash flow projection. The only difference between these They look the same cashflow statement is about cashflows that happened in the past and cashflow projections are what you're projecting to happen in the future in your business plan. It's a deal. to include both if you are just starting, because guess what?

If you're just starting a part of your cash flows are your startup fees and they are very different than your ongoing fees, but if your business has been ongoing, you really only need to add. The projections to your business plan. And here's how it would look like. It's very simple. I'm going to walk you through it.

So cash [00:02:00] flows literally means exactly that cash flowing into your business. Usually the only way it does that is through revenue and cash flowing. Out of your business, it's expenses. Now, in addition to revenue, you might have interest or things like that, but most of the revenue is product sales or service sales of your actual business.

So let's take a look at it. Maybe you have product one, product two service, one service, two for every month, you see January, February, March, you can fill it out. And you'll get your total revenue just by summing it up. You see, it's very simple. You just sum it up. And then you also want to do the same thing for your expenses, your legal fees, your rent, your utilities.

And just to show you the variety of expenses you might have, like raw material costs. For most businesses, there are no raw material costs. But for different businesses, they are just very different materials. For some businesses, you need to buy vehicles. For some [00:03:00] businesses, you don't. So, whatever your business is, you want to make absolutely sure that you list all the product and service sales, make a line item for each one, and make a line item for every expense you have.

And then you want to add them up, you see? So total cash revenue here is this, and the total expenses is this. And then You also have two lines at the bottom opening cash balance. That's what you started the month with. So each month your opening cash balance is the closing cash balance of the previous month.

Simple. And then you want to have your closing cash balance. It's the opening cash balance that we just discussed how to create that plus whatever was the outcome of this month. Okay. So this month, for example, the cashflow is like a negative one, right? We had in this example, we had more [00:04:00] expenses than revenue.

So you will have a negative cashflow this month. And that's it. That is your cashflow projection statement for your business plan. You can make this for a year. You can make this for six months. You can make this monthly. You can make this quarterly, whatever you feel is important to show. for if you're showing it to an investor or whatever.

If you're just starting your business, I recommend doing it monthly because for yourself it will give you a really good idea of what's really happening in your business and then you can tell oh my god this product is not selling much but this product is selling more a lot and so that's high priority and then you can also see what you're spending on a lot and so this will give you a really clear picture What you should focus on in terms of maybe decreasing spending somewhere or increasing efforts for some product that's taking off.

So this will give you a really good idea for an overview of your business.

