- 1). Collect information on sales history. If the company has no sales history yet, make realistic average monthly projections based on other companies and professionals in the industry. Enter this into one row of a spreadsheet document.
- 2). Analyze information on all receivables, such as unpaid accounts. Determine the likelihood and rate of repayment and include this in monthly revenue estimates by entering it as another row of your spreadsheet.
- 3). Calculate the cost of the products and materials you will be selling. Remember that each month's revenue will probably depend on your ability to purchase inventory and materials during the previous month. Estimate an average monthly inventory/material cost or put a series of numbers that gradually grows as your business expands. Enter this as another row in your spreadsheet.
- 4). Add up all of your operating expenses, such as loan payments, rent, leasing fees, labor, utilities and transportation costs. Express this as a recurring average number in its own row of the spreadsheet.
- 5). Place a net cash-flow calculation in each column (representing a month, quarter or year). Use a function for this that adds the revenue streams and subtracts the expenses from each row above.
- 6). Subtract the owner's draw from your net cash-flow statement. This is what the owner "takes home" instead of a set salary. Take the owner's financial situation into account when figuring this number: it may need to be over a specific amount for him to take care of his living expenses.
- 7). Take seasonal fluctuations into account when figuring all of the numbers. Such fluctuations affect some businesses more than other. Will this business experience a boom in the summer months or just before the end of the year? Will poor weather conditions influence revenue?
- 8). Keep a record of the business's reserve. This is the money that the business has set aside to protect against downturns in revenue caused by seasonal fluctuations or other factors. Add the net cash flow that is left after the owner draw every period to show how much the company will be able to save.
SHARE
