What Is a Cash Flow Plan?


A written cash flow plan is often a business’s first experience with trying to determine its cash flow. Over time, you’ll find reasons to do a cash flow plan on a weekly, monthly, quarterly and annual basis.

But what is a cash flow plan?

It’s when businesses work to manage cash inflows and outflows.

What is a monthly cash flow statement with current and prior month figures?

Monthly cash flow statements, which include the prior month’s figures, are month-end financial statements. At the beginning of a new month, you’ll have the data from the previous month to learn:

  • What cash went out of the business
  • What cash came into the business
  • Who still owes you money
  • Total cash flow

Running reports to create a monthly cash flow report empowers you to track expenditures and inflows. Perhaps excess funds went out of the business last month, so you’ll need to lower spending in the current month or take out credit to cover the expense.

Cash flow statements provide great insight into the financial health of a business.

However, what’s the purpose of creating a monthly cash flow plan?

Purpose of monthly cash flow statements

In business, data is power. Companies that don’t track their cash flow will find that they’re spending money blindly. You never truly know how much is going in and out of your business each month without looking at your financial statements.

When you start using monthly cash flow statements, you’re going to do a few things:

  • Monitor all of the cash outflows during a month
  • Monitor all of the cash inflows during a month
  • Learn your overall cash position

If you’re accounting and finance departments use monthly cash flow statements, it helps all decision-makers better understand the company’s cash flow and liquidity. Knowing cash flow drives business decisions and also ensures that your business doesn’t have an unexpected cash crunch that requires you to take out loans or use lines of credit to keep the business running.

Instead of trying to explain why you should always have a cash flow plan, let’s take a look at who is using these reports in a business

Who uses this type of report?

Cash flow plans and reports are used by a business’s decision-makers. If the business has an accounting and finance team, these teams will use cash flow reports to make key decisions. For example, you may have had an unexpected outflow last month and planned to hire someone new this month.

Accounting may look through the statement, learn that you don’t have the cash position to hire someone this month and postpone the hiring process.

The key stakeholders that use a cash flow plan and monthly statement include:

  • Owners
  • Vice presidents
  • Managers
  • Human resources
  • Finance department

Anyone that has to make business decisions will use these reports. Managers may decide that the business’s cash position is so low that they lay off employees. Owners may decide that there’s enough cash position to open a new office with minimal debt in the process.

When you have a monthly cash flow report, you can make data-backed decisions that are lower risk than making decisions blindly.

What tools are typically used for reporting, planning and dashboards?

Now that you know why it’s important to have a cash flow plan, you need to know what tools to use to create a monthly cash flow plan. You can use something like Excel to create a basic cash flow plan, but this is a very tedious way to create cash flow reports when you have more than a few dozen entries.

Instead, if you want to run reports and look into your cash flow, you’ll need:

  • Native ERP tools
  • Spreadsheets
  • CPM tools
  • Dashboards, such as Tableau

You can also find SaaS options that integrate your existing technology and connect to your accounting software. When you use the right SaaS solution, you can integrate it with your Xero or QuickBooks account to have real-time, updated data for cash inflows and outflows.

Tools make it easier and faster to run reports and plans.

However, you can make all of your monthly statements by hand or using Excel. The main drawback is that you’ll waste a lot of time and resources that would be better used for other areas of your business.

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