Definition: The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset .

 

Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of assets. A cash flow budget highlights the following figures:

  • Sales/revenue
  • Development expenses
  • Cost of goods
  • Capital requirements
  • Operating expenses

Your cash flow projections are based on the past performance of your business. To project your cash flow, start by breaking down projected sales over the next year according to the percentage of business volume generated each month. Divide each month's sales according to cash sales and credit sales. Cash sales can be logged into the cash flow statement in the same month they're generated. Credit sales aren't credit card sales, which are treated as cash, but rather invoiced sales with agreed-upon terms. Refer to your accounts receivable records and determine your average collection period. If it's 30 days, then sales made by credit can't be logged into cash until 35 to 40 days after they're made. (Although the collection period is 30 days, you still have to deposit the money and draw on another bank to receive payment.)