Start Small Win Big: Your Week 4 Action Plan

Step 4: Understand your finances.  A couple of months ago I spoke to a woman who owned a struggling stationery business and I asked her how much longer she thought she could survive based on how much cash she had available in her company. She looked at me like I had just landed from Mars. Then I asked her how much money she spends a month. Again, blank stare. So I asked her how much cash she brings in a month. By now you can guess what the reaction was.

This is a scary place to be.

While digging into your business’s financials may not be your idea of a good time, you are shooting yourself in the foot if you ignore them. So this week’s assignment is to build a 12-month cash flow statement.

Wait, come back, I’m here to help.

Your cash flow statement may be the most important financial statement you create because it helps you get a handle on how much cash you have on hand at any given moment. During the recession I spoke to a lot of business owners who had to close down their businesses, not because they didn’t have customers coming in, but because they did not have enough cash available to help them weather the hard times. With a better understanding of their financial situation, they might have made it.

Running out of cash should never come as a surprise. And if you stay on top of your cash flow, you can plan ahead to deal with an upcoming period when money will be tight. You do not want to wake up one day and realize you do not have enough money in your account to pay your vendors or your employees.

So let’s get started. First, what is a cash flow statement? It’s simply a record of two things: the cash that’s coming into your business and the cash that’s going out of it. That’s it. Really.

Resources:

12-Month Cash Flow Statement on SCORE.org

Also on SCORE.org: Business Plans and Financial Planning Documents

Editor’s note: This is the fourth of eight installments for SUCCESS’s 2nd annual Start Small Win Big entrepreneur challenge. If you’re not signed up for Start Small Win Big, it’s not too late. Visit SUCCESS.com/winbig to join.

People who read this also read...

1. Start Small Win Big: Your Week 2 Action Plan Step 2: Keep it simple. A couple of years ago at my company Goodsearch.com, we...
2. Start Small Win Big: Your Week 1 Action Plan Start Small Win Big: Your Week 1 Action Plan January 21, 2013 Editor's note:...
3. Start Small Win Big: Your Week 3 Action Plan Step 3: Look at metrics. It’s week three and it’s time to set tangible goals...
4. Start Small, Win Big 2012: Your Wk 3 Action Plan Your Week 3 Action Plan For Week 3 (Feb. 6), read the February 2012 issue...
5. Start Small Win Big 2012: Your Wk 7 Action Plan Your Week 7 Action Plan For Week 7 (Mar. 5), read the March 2012 issue...

842112 Responseshttp%3A%2F%2Fblog.success.com%2Fweek-4%2FStart+Small+Win+Big%3A+Your+Week+4+Action+Plan2013-02-11+21%3A11%3A15JJ+Ramberghttp%3A%2F%2Fblog.success.com%2F%3Fp%3D8421 to “Start Small Win Big: Your Week 4 Action Plan”

1. PTLHardwoods says:

   February 27, 2013 at 5:42 pm

   I've changed my business focus this year to "Cash is King" NO DEBT That way in the slow times I don't have to worry about coming up with the cash to pay for debt. It takes great discipline though to build up that retained earnings account and I got a ways to go but hopefully it will pay off for me by having less stress.

   [Reply]

   Reply
2. yordis says:

   February 25, 2013 at 10:07 pm

   January 1st, 2012 – December 31st, 2012
   My Cash Flow Statement is an abbreviated version since there is no income from the site as of yet.

   Personal Cash Investment $6,000.00
   Business Expenses
   Design and Building of site $2,500.00
   Domain Name $50.00
   Hosting Services $125.00
   Legal Fees $600.00
   Site Upgrade $100.00
   Continuing Education $100.00
   Teaching Video for Moderators $230.00
   Promotional Material $500.00
   Total Expenses $4,205.00
   Personal Cash Investment $6,000.00
   Total Expenses – $4,205.00

   Balance left in Kitty + $1,795.00

   [Reply]

   Reply
3. Flootie says:

   February 21, 2013 at 5:57 pm

   I have created cash flow statements and they are a great 10,000 foot view on how best to manage finances. I am self funding a new startup internet based business right now (subscription fee based) so it is all "outgo" and no "income" yet. I have created an income forecast that we are tracking as a goal in leiu of history.

   [Reply]

   

   Josh_Ellis11 Reply:
   February 22nd, 2013 at 4:21 pm

   Hi Flootie,

   Glad you found a way to make the most of this exercise. It's a great advantage to be able to judge your progress against your expectations, and adjust accordingly.

   Way to go!

   Josh Ellis
   SUCCESS Magazine

   [Reply]

   

   Josh_Ellis11 Reply:
   February 22nd, 2013 at 4:21 pm

   Hi Flootie,

   Glad you found a way to make the most of this exercise. It's a great advantage to be able to judge your progress against your expectations, and adjust accordingly.

   Way to go!

   Josh Ellis
   SUCCESS Magazine

   [Reply]

   Reply
4. Shelby Skrhak says:

   February 14, 2013 at 10:09 pm

   Hi contestants,
   It's almost the end of the week–have you completed your cash flow statement? Have you started?

   Reply here and share your progress!

   Best,
   Shelby

   [Reply]

   

   yordis Reply:
   February 18th, 2013 at 6:51 pm

   I have not started yet; I need some clarity. My business idea (project) is a soon to be launched website for Nursing Professionals globally. So far I have not earned any money from the site and understandably so; How would I do my 12 month projection. So far, it's been about spending on legal fees and the building of the site. I hope to launch in June but my projected income will be from housing advertisements on the site, and I know it will take a couple months to build credibility and attract premium advertisers. How should I go about writing my projections.

   My second question is, how is each person's project judged; is it judged from our entry on the blog in response to the "weekly challenge" sent to our e-mail boxes? …just asking.

   [Reply]

   

   yordis Reply:
   February 18th, 2013 at 6:51 pm

   I have not started yet; I need some clarity. My business idea (project) is a soon to be launched website for Nursing Professionals globally. So far I have not earned any money from the site and understandably so; How would I do my 12 month projection. So far, it's been about spending on legal fees and the building of the site. I hope to launch in June but my projected income will be from housing advertisements on the site, and I know it will take a couple months to build credibility and attract premium advertisers. How should I go about writing my projections.

   My second question is, how is each person's project judged; is it judged from our entry on the blog in response to the "weekly challenge" sent to our e-mail boxes? …just asking.

   [Reply]

   Reply
5. DorisVela says:

   February 12, 2013 at 6:29 pm

   Hello everyone,

   Money is definetely a very important component, but I have to say that many business owners (at all levels) including myself follow the scripture on this subject. – "For we walk by faith, not by sight" 2 Corinthians 5:7 (from the King James Bible Online), even Andrew Carnege & J.D. Rockeller played by faith! Both built multi-million companies from the ground up without all needed initial capital.

   In this world, I have seen business owners with heavy cash collapse and others that built great companies with nickles & dimes. Even when MONEY is a crucial asset to continue in business, and projections must be made; I believe is more important to persevere and keep looking forward. Business Owners must really analyze their projections and vision if they desire to pursue a career in business, shift in a different direction or get out of the boat "before" it sinks.

   Success for All,
   Doris H Vela

   [Reply]

   Reply
6. Paul Lamoureux says:

   February 11, 2013 at 11:16 pm

   Ha, I''m not afraid!! In my "other job" we always follow the money! If there's one thing that I do is pay attention to the money!

   [Reply]

   Reply
7. Chance Johnmeyer says:

   February 11, 2013 at 6:38 pm

   I signed up for the contest and received nothing for it. Not one thing.

   [Reply]

   

   Shelby Skrhak Reply:
   February 12th, 2013 at 2:15 pm

   Hi Chance,
   Sorry to hear that! Will you send me an email so I can look up your email address or reply here? My email is webeditor at success dot com.

   Best,
   Shelby Skrhak
   SUCCESS.com

   [Reply]

   

   Shelby Skrhak Reply:
   February 12th, 2013 at 2:15 pm

   Hi Chance,
   Sorry to hear that! Will you send me an email so I can look up your email address or reply here? My email is webeditor at success dot com.

   Best,
   Shelby Skrhak
   SUCCESS.com

   [Reply]

   Reply
8. @traklight says:

   February 11, 2013 at 5:31 pm

   I laughed also, but I am a recovering accountant so one thing that I know is that Cash is King – and that you have to do your cashflow and understand your monthly burn rate. This is great advice and in addition to SCORE, your local SBDC is another great resource.

   [Reply]

   Reply
9. Lisa Cash Hanson says:

   February 11, 2013 at 4:59 pm

   I have to laugh especially when you say "Wait come back" I'm with most I'm sure when it comes to financials it's my least favorite part. I can't say enough great things about score I'm working on my plan now for http://www.snuggwugg.com before they are even launched. But if you don't know where your money is going then chances are the business may fail. Even though I dread it, I'm writing a complete business plan financials and all.

   [Reply]

   Reply