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Creating a cash flow projection for your first year of business is a vital step in understanding your financial health. A cash flow projection allows you to predict the timing and amounts of cash inflows and outflows within your business, which is crucial for effective planning and management. Positive cash flow enables opportunities like hiring additional employees or investing in new assets, whereas negative cash flow necessitates strategic problem-solving to address financial challenges. To start your projection, estimate the cash entering and leaving your business, and calculate your cash flow for the entire year. Begin with the “12-Month Cash Flow Spreadsheet,” making a copy and adding your business name and the chosen start date for your forecast. Include your pre-startup cash, setting up a running total of available funds before expenses. In the “cash receipts” table, list every potential cash source, such as sales, collections, and loans. Input your expected incoming cash for the first month, breaking it down by each source, and then replicate these figures across each month as a preliminary estimate.

The process continues with calculating cash paid out by your business. Start with pre-startup costs found in your “Startup Expenses and Capital Worksheet” and add these to the spreadsheet, which automatically calculates subtotals. Next, estimate monthly expenses and extend these across the table, adjusting for any one-time payments as necessary. The spreadsheet then computes both the subtotal and total cash paid out. This total is combined with your total cash available, providing a clear picture of your cash on hand. Optionally, you can complete the non-cash flow information, known as “essential operating data,” for a more comprehensive financial overview. Once your cash flow statement is ready, link it in your business plan to have a complete financial picture. This projection is an invaluable tool for guiding strategic decisions like applying for loans or adjusting hiring plans based on expected cash flow variations. Now, take action: create your own cash flow projection spreadsheet, estimate the cash coming in and going out, review your total cash flow, and integrate this vital information into your business plan.