How To Monitor Your Cash Flow

One of the first questions I ask my coaching clients is ‘Do you monitor your cash flow?’ And the answer is almost invariably ‘no.’ Given that lack of financial planning and poor financial record keeping are two of the most common reasons why businesses fail, this is a serious mistake. So I coach all my clients to ensure the foundations of their business are rock-solid, and to start monitoring the following:

  • Their Sales Pipeline
  • Cash Flow (Or Income & Expenditure)

Firstly I ask my clients to keep a simple record of their sales pipeline; that’s everybody who has enquired about using their services or buying a product from them. And then to keep a record of their ‘sales conversations’ with each person so that they know at all times where each prospect is in their sales funnel. To read more about how to use a sales pipeline and access my Sales Pipeline Tracker, click here to read my blog post, 'How To Monitor Your Sales Pipeline.'

This Sales Pipeline Tracker tells you what sales you are forecasting, and you can then use this information to complete the income section of my Cashflow Template - 2014 to 2015.

Sound complicated? It really isn’t! It just takes a few minutes of your time each week to bring each spreadsheet up to date with the latest information. The Cash Flow Template has been set up with all the formulas - to add up each column/ row - and so all you have to do is enter the data. And this way you know exactly how much money you’re bringing in and planning to spend so that you can adjust your activities to ensure your business is profitable.

  1. Start with confirmed income. Enter the name of the customer in Column A and record the income you expect to receive from jobs which are confirmed against the month you expect to be paid. In the status column, record this as ‘confirmed.’ (The spreadsheet has been put together so that you can see how much income you expect to bring in, both on a monthly basis as well as across the period April to March.
  2. Go through each expenditure heading and record what bills you expect to pay against the month when they are due. You may want to make a note of the assumptions you have made, either on the spreadsheet or in a notebook.
  3. Double check your entries are correct!
  4. Save this version to your computer. This shows you what profit you can expect to receive during the coming financial year, based on the work you have confirmed.
  5. Use this information to determine what you can afford to invest – at this stage - in the marketing and infrastructure of your business as well as your own business skills development.
  6. Go back to the section on income, and now enter the details of all the jobs you have in the pipeline against the months you ideally expect to invoice for them. In Column O, record whether these jobs are ‘Probable’ or ‘Possible.’
  7. Now go through each expenditure heading and record what bills you expect to pay against the month when they are due, should the ‘Probable’ and ‘Possible’ jobs come off. You may want to make a note of the assumptions you have made, either on the spreadsheet or in a notebook.
  8. Double check your entries are correct and save this as your working document to be updated on a weekly basis. Ask yourself whether you have enough work coming in to meet your business and personal income targets? Will you need to scale up your marketing activities? If so, from when?
  9. Use this information to determine what you will be afford to invest in the marketing and infrastructure of your business as well as your own business skills development, should you bring this volume of work in. What are your priorities? To increase your marketing budget? To engage a book-keeper to free you from having to do the accounts at the weekend? To engage a call-answering service so that you don’t miss out on potential new business? To put in place a proper HR system for managing staff terms and conditions? To make sure your H&S is up to scratch so that you can bid for larger contracts?
  10. Make it a habit to set aside regular time each week to update and review this spreadsheet so that it becomes a working document. Keep tabs on the status of invoices by recording whether they are ‘Paid,’ ‘’Billed’ or ‘Outstanding.’ If any invoices are ‘Outstanding,’ refer to my article, ‘Cashflow Is King – Top 10 Tips For Managing Your Business Cashflow.
  11. Use this review process to think about what you need to do to grow your business.

To receive a copy of my Cash Flow Template, Cashflow Template - 2014 to 2015.