Preparing a Weekly Cash Flow Report may seem daunting but it is a very effective accounting tool. It is basically a statement of cash coming into the company and the cash going out of it every week. A cash flow statement tells you in what kind of health your finances are in. Cash flow analysis is important to be prepared for all eventualities. The coming in and going out of cash in your business is changing constantly. To keep your business solvent you need to find patterns in cash management.
If you think your business is outrunning the cash flow, prepare a Weekly Cash Flow Statement. To have a clear picture of cash flow over a week enables you to have the right amount of funds to pay bills. A cash flow statement documents changes in the cash you have available to you which includes the money in your bank account and the short-term investments that can easily be converted to cash. In other words, a cash flow statement is a picture of the activities of your business. These activities are operating activities, investing activities, and financing activities.
Cash flow statements can be made in two ways: using the direct method, or the indirect method. The indirect method involves tracking money coming in and money going out pertaining to operating activities. It merely subtracts expenditure from income. The indirect method is slightly more complicated. It takes into account net income and depreciation factors. You can choose the method you want to use depending on the goal you want to achieve with the cash flow statement.
Create a Weekly Cash Flow Statement based on the three kinds of activities mentioned above. The cash flow statement should be your income and expenditure at a glance. Review them under the three categories that have been discussed. Use an excel sheet or template and organize the data appropriately. Your entries should essentially show cash coming in and cash going out each week. This will help you forecast your expenditure and revenue for the next week. Once you have done that you can forecast profit or loss.
Once you take a look back over the week, you will be able to figure out where you spent your money and discern trends in the business activity. This will help you look forward to the next week and ensure that you have enough funds to fulfill upcoming obligations. Your upcoming expenditure and the revenue forecasted for the coming week, will all depend on the cash flow. This is where the Weekly Cash Flow statement can help.
Based on the Weekly Cash Flow statement, you can decide to take appropriate action; like cutting down on expenses if you think too much money is being spent compared to money coming in, or infuse short-term capital into the business if you think you do not have enough cash on hand to pay the next week’s bills. Monitor your cash flow and revenue projections and evaluate your business activities and make adjustments according to those.