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Understanding your cash flow, or how money travels in and out of your business, helps you make informed financial decisions. But with all of the purchases and sales you make in a given month, it can be tough to know for sure where every dollar goes. By creating a statement of cash flow, you can better understand your business’s budget – and what you need to do to stay on track. Use this worksheet and the tips below to create a comprehensive cash flow model.
A statement of cash flow generally has two columns: credits and debits. These columns allow you to track your income and expenses across a variety of categories, including net income, and cash flow from operations, investments, and financing activities.
Finally, add the amount of cash you had on hand at the beginning of the month to your total. This will tell you how much working capital you’re ending the month with. If you follow this process on a monthly basis, you’ll be able to identify where your cash is going and find opportunities to improve.
Once you know how to manage your cash flow, you can begin to think about ways to use your capital to invest in your business. From hiring employees to marketing your brand, understanding your cash flow helps you focus on what you love most – running your business.