Cash flow statement and introduction to the financials section 

Lesson Details:

Video Transcription: With this video let's start the financial section of our business plan I know many people are afraid of this section but I promise it won't be that difficult there are three major parts of your financial section of your business plan they are your income statement that's one your cash flows that's two and your balance sheet that's three we're gonna cover all of that in a very easy way I promise it's pretty simple once you get a hang of it and in addition to that I'm gonna add a few tidbits here and there just to round out your planning knowledge so you'll actually get a little bit more than the typical business plan would have and you may or may not want to include it in your business plan but I recommend that you definitely think through it in your business plan so let's start with your business plans first financial item and I'm gonna make that the cash flows the reason I'm doing that is because this is the simplest one to make and for cash flow you have two things you have two types of documents you can create a cash flow statement and a cash flow projection the only difference between these they look the same but cash flow statement is about money that cash flows that happened in the past and cash flow projections are what you're projecting to happen in the future in your business plan it's ideal to include both if you are just starting because guess what if you're just starting then you have a part of your cash flows or your interest started startup fees and they're very different than your ongoing fees but if your business has been ongoing you really only need to add the the projections to your business plan and here's how it look like it's very simple I'm gonna walk you through it so the you basically cash flows means exactly that and cash flowing into your business usually the only way does that is through revenue and cash flowing out of your business it's expensive now in addition to revenue.

You might have interest or things like that but most of the revenue is the actual makes up actual say product sales or service sales of your actual business so let's take a look at it maybe you have product one product to service one service to and you want to for every month you see January February March you can fill it out and you'll get your total revenue just by summing it up you see it's very simple you just sum it up and then you also want to do the same thing for your expenses your legal fees your rent your utilities and just to show you the variety of expenses you might have like raw material costs for most businesses there are no raw material cost but they're just for different businesses they're just very different materials so for some businesses you need to buy vehicles for some business as you know so whatever your business is you want to make absolutely sure that you list all the products and service sales make a line item for each one and make a line item for every expense you have and then you want to add them up you see so total cash revenue here is this and the total expenses is this and then you also have two lines at the bottom opening cash balance that's what you started the month with so each month you're opening cash balance is the closing cash balance of the previous month simple and then you want to have your closing cash balance it's the opening cash balance that we just discussed how to create that plus whatever was the outcome of this month okay so this month for example the cash flow is like a negative one right we had more in this example we had more expenses than revenue so you have a negative cash flow this month and that's it that is your cash flow projection statement for your business plan you can make this for a year you can make this for six months you can make this monthly you can make this quarterly whatever you feel is important to show before if you're showing it to an investor or whatever if you're just starting your business I recommend doing it monthly because for yourself it will give you a really good idea of what's really happening in your business and then you can tell oh my god this product is not selling much but this product is selling more a lot and so that's high priority and then you can also see what you're spending on a lot and so this will give you a really clear picture what you should you know what you should focus on in terms of maybe decreasing spending somewhere or increasing more increasing efforts for some product that's taking off so this will give you a really good idea for an overview of your business.