A negative cash flow indicates that you are spending more than you are earning. A positive cash flow indicates that you are earning more than you are spending. You need to have a large enough positive cash flow that you can continue to invest in your company’s growth.
Next, calculate the outflow. Cash outflows from operations include cash payments for goods purchased, cash payments for notes to suppliers, cash payments to employees, cash paid for taxes, fees, and fines, and interest paid to creditors. Finally, subtract the outflow from the inflow. Write this number in the “Operating Activities " column. If the number is negative, indicate this with a – sign or sign of your choosing.
Next, add up the financing outflow. Include money paid towards principal on debt, money paid to reacquire equity (buying back shares of stock), and dividend payments to shareholders. Subtract your outflow from your inflow, and write this number in the “Financing Activities” column of your spreadsheet. "
Add up your cash outflow, including money from investing activities paid to acquire debt, buy equity interest, and disbursements made to purchase assets or physical property such as plants and equipment. Subtract your outflow from your inflow, and put this number in the “Investing Activities” column.
Create a spreadsheet with four columns: Monthly income, Monthly Expenses, Averaged Other Income, and Averaged Other Expenses.
Add the amount you spend on food, both groceries and food out. Calculate these separately if you eat out more than twice a week. Next, add the amount you spend on transportation: gas, tickets, taxis. Add the amount you pay in loans, the amount you pay for insurance and health care. If you have children, calculate what you pay in childcare, tuition, and extracurricular lessons and tutoring. If you are a student, add what you pay for your own school expenses. Finally, add the money you spend on clothing, recreation, and gifts. Include money spent on movie tickets, trips, and other typical monthly expenses. If an expense is large and unusual, put it in the “Averaged Other Expenses” column.
Take your non-monthly income and divide it by 12. Put that number in your “averaged other income” column. Take your unusual yearly expenses, such as a purchase of a car for your daughter’s graduation, or a yearly vacation to see your relatives. Divide these expenses by 12, and put them in your “averaged other expenses” column.
If you end up with a negative number, you have a negative cash flow. That means you are spending more than you earn, and it’s time to cut back on your expenses.
Get ahead of yourself: use pre-numbered cash receipts, and account for them all. For disbursements, use pre-numbered checks. For the individual, keep close track of all your expenses. Save your receipts, and visit your bank account frequently. Depending on your business, you can try billing your customers at the end of the month, so everything’s better organized. It’s a good idea to work off retainers if you’re dealing with an expensive service. This is a good way to protect yourself and keep your cash flow during the execution of the service.
If most of your extra cash flow is tied up in investments, make sure there are ways to free some up in an emergency. Establish credit with your bank for moments of cash flow difficulty. [15] X Research source
If you pay rent, negotiate with your landlord for a lease that will help you stay where you are. Individuals may want to follow simple cost-cutting practices, such as cooking at home rather than eating out. Plan your meals for the week over the weekend, and get all your groceries in one or two trips. Cook a large amount of two or three things you really like, and enjoy the leftovers. Businesses and individuals should avoid impulse purchases. Keep good stock of what you have and what you need. Wait 48 hours before making an unplanned purchase, and question any purchasing impulse that falls outside of your anticipated needs.
