For many small business owners in Singapore, managing cash flow can feel like trying to fill a leaking bucket. Money comes in, but it seems to disappear just as quickly, leaving you wondering where it all went. The problem often isn’t a lack of income, but rather a lack of knowledge on how to keep track of where it went. The good news is, you don’t need an expensive software or a finance degree to get your cash flow under control. I have a phobia of debits and credits so if you are just like me, you will find this guide straight forward to implement. A simple excel spreadsheet can be a powerful tool to help you understand, manage, and ultimately improve your cash flow.
Why Excel Spreadsheet?
Have you been to the grocery store without a shopping list and end up picking up items you don’t need and forgetting the essentials, blowing your budget and wasting time. Now, imagine having a shopping list that not only keeps track of what you need but also helps you plan your meals for the week, ensuring you have enough food without overspending. That’s what an excel spreadsheet can do for your business. It’s like a shopping list for your finances, helping you keep track of what’s coming in, what’s going out, and what’s left over. If you are someone who is used to doing grocery shopping without a shopping list, bear with me and you will see the benefit of having one.
The Basics of a Cash Flow Spreadsheet
A cash flow spreadsheet is essentially a tool that tracks your cash inflows (money coming in) and outflows (money going out). It helps you see whether you’re running a surplus (more money coming in than going out) or a deficit (more money going out than coming in) at any given time. Here’s how to get started:
- Create Two Buckets of Cash Flow - Inflows and Outflows Think of these as your “income” and “expenses” sections. Under income, list all the sources of revenue your business has, such as sales from different platforms, client payments, or any other income. Under outflows, list all your expenses, like rent, salaries, utilities, and supplier payments.
- Break It Down: Just like tracking your household expenses, you’ll want to break down your business inflows and outflows into manageable time frames - I recommend to break it down weekly if you are currently facing cash flow challenges and adjust this to monthly once your cash flow is healthy. This helps you spot patterns and predict future cash flow more accurately.
- Calculate the Net Cash Flow At the end of each period (week or month), subtract the total outflows from the total inflows. If the result is positive, congratulations! You have a surplus. If it’s negative, it’s time to investigate where your money is leaking.
Step-by-Step Guide to Building Your Cash Flow Spreadsheet
Let’s get into the nitty-gritty of building your cash flow spreadsheet, step-by-step. Don’t worry if you’re not a spreadsheet expert—we’re keeping it simple.
Step 1: List All Your Income Sources
Start by listing all different sources of income. This could be:
- Sales Revenue: The money you make from selling your products or services.
- Accounts Receivable: Money that is owed to you by customers.
- Other Income: Any additional sources of income, including income from investing activities like subletting a part of your office, must be included here as long as it is invoiced under the same company name.
Step 2: List All Your Expenses
Next, list all your expenses. It’s important to be as detailed as possible. Common categories include loans, supplier invoices, operating expenses, vehicle expenses, taxes, etc. When doing this, also take this opportunity to evaluate if all these expenses are necessary. If expenses are necessary, is there a cheaper alternative? Remember, a penny saved is a penny earned.
Step 3: Record and Update Regularly
A spreadsheet is only as good as the data you put into it. Make it a habit to update your cash flow spreadsheet regularly. This way, you can spot trends, predict shortfalls, and make adjustments quickly. Once our cash flow is on track, it’s important to remind ourselves not to get complacent and stop watching our cash flow.
Step 4: Project Future Cash Flow
Once you have a few weeks or months of data, start using your spreadsheet to project future cash flow. This involves predicting your income and expenses based on past data and any upcoming changes, like giving you an indication of whether the business can sustain with a 50% rent hike.
Step 5: Identify Patterns and Make Adjustments
With a few months of data in your spreadsheet, you’ll start to see patterns. Maybe your sales drop during certain months, or your expenses spike at the end of the year. Use this information to make adjustments, such as cutting unnecessary expenses during lean months or saving extra cash when times are good. Just like how I cut down on dining out when my business was struggling in the early days because I knew that I will end up with a shortfall if I didn’t do so.
Advanced Tips
Once you’re comfortable with the basics, there are a few more advanced tricks you can use to get even more out of your cash flow spreadsheet:
- Create a Cash Flow Forecast: Use formulas to project your cash flow for the next three to six months based on your past data.
- Implement Conditional Formatting: Highlight cells that show a deficit in red and a surplus in green. This gives you a quick visual overview of your financial health.
- Use Pivot Tables: If you’re tracking a lot of data, pivot tables can help you summarize and analyze your inflows and outflows more efficiently.
Cash flow management doesn’t have to be complicated or expensive. With just a simple spreadsheet, you can gain control over your finances and stop the money leaks that are hurting your business. If you need help in creating one, the template can be downloaded here. Don’t wait for your next financial crisis to start managing your cash flow. Grab that spreadsheet and start plugging in your numbers today. Your business's financial health is too important to leave to chance. Remember, it’s not about being perfect from the start; it’s about taking the first step.