For many startups and small businesses cash flow, or the lack of cash flow, is the most important factor when it comes to business survival. Entrepreneurs must be on top of their cash flow, and be able to create cash flow projections for the future. The purpose of this guide is to walk you through the process of creating a 12 month cash flow projection for your business using ProjectionHub.
ProjectionHub is a web-based tool that helps business owners create financial projections without the need to be a PhD in spreadsheet modeling.
Much of this guide is identical to the guide on How to Create an Income Statement Projection with a few additions and subtractions specifically related to cash flow.
Here is how it works:
- Enter Financial Projection Info
- ProjectionHub Automatically Creates Your Spreadsheets
- Spreadsheet Projections Are Emailed to You
- Download Your Spreadsheets
Let’s get started.
1. Contact Information – First we are going to ask you for your contact information. This accomplishes 2 things:
- Creates a ProjectionHub Account – By providing your email address and a password we are able to create an account for you. Now you will be able to quit in the middle of your projections and all your data will be saved and ready for you to jump back into at any time simply by logging in.
- Includes Contact Info on Spreadsheets – One of the most common mistakes made by entrepreneurs is neglecting to include their contact information with their financial projections. Simply enter your contact info once and we will include it on every page of your projections.
2. Start Creating a 12 Month Cash Flow Projection
Simply click to start creating your 12 month cash flow statement projection. Depending on the size of your business, your familiarity with creating financial projections and how much you prepared before getting started, you should budget between 10 minutes and an hour to complete your projections for this 12 Cash Flow Statement.
3. How Will You Project Sales?
The next step is to determine how you will project your sales numbers. ProjectionHub gives you three options:
- Project sales for each individual product or service (Choose this option if you only have a few products and/or services)
- Project sales for product lines or groups of services
- Project sales in total – (If you have hundreds of products and services, you may want to choose this option)
4. Enter Sales Projections
Creating accurate and logical sales projections can be incredibly difficult. Anyone can throw some numbers into ProjectionHub and come up with a set of projections, but your projections need to be based on data. They need to be bottom’s up. They need to include logical assumptions. I have created a short instructional video on how to create sales projections:
Once you know what you are going to forecast for sales, you can enter each individual product or service into a table.
You will notice that we ask for the product name, the sales price per unit, and how many days it will take you to get paid. The days to get paid is not important for your income statement, but it can become incredibly important information for your cash flow projections.
Next you will enter in the number of units you intend to sell for each product for the next 12 months.
Finally, you can add additional products or services to your sales projections quickly and easily.
5. Project Your Cost of Goods Sold
Now you need to start projecting your expenses, starting with, Cost of Goods Sold. In this video I explain what cost of goods sold is and what it is not.
Now you simply need to enter the direct labor, material costs, and variable expenses for each product or service:
6. Enter General, Administrative and Selling Expenses
Now we need to project all of your General, Administrative, and Selling expenses in the tables below:
The first question we ask is “How many days does it take you to pay your bills?” Again this question will impact your statement of cash flows, not your income statement.
Next you will need to input your corporate income tax rate if you anticipate paying corporate taxes.
Lastly, you will need to enter projected expenses for the first 12 months for various categories like:
- Utilities, etc.
7. Cash on Hand
Next you simply need to include how much cash you have on hand currently. That will help us create your cash flow projection.
8. Download Financial Projections
You are done! Now you can download your financial projections as an Excel document.
Simply click the “Download Income Statement”
9. View and Edit Your Financial Statement
There are 2 ways you can edit your financial projections.
- Edit the Excel Spreadsheet – The first tab of your Excel Spreadsheet file will be a data entry sheet. You can change the data directly in the Excel file to change your projections. If you are not comfortable with Excel, then I suggest logging back into ProjectionHub and editing your financials.
- Login and Edit in ProjectionHub – Simply go to http://www.projectionhub.com and login at the top right corner. Use your email address and password to login, and edit the data in your projections.
There you have it, a detailed guide on how to create an income statement projection using ProjectionHub. Get started now!