16

Cash Flow Analysis

Goals:

• Develop viable Cash Flow Analysis which supports the start of a new business

Skills:

• Using automated spreadsheet

Overview:

Up to this point, the students have been formulating ideas, gathering data, and assessing sales potential. Now the focus shifts to implementation.

The Cash Flow Analysis is the most important part of a Business Plan because it integrates virtually every fundamental business action that the owner will need to accomplish. From a management prospective, the Cash Flow Analysis establishes monthly sales goals and correlates the staff and material resources required to achieve those sales. The Cash Flow Analysis also projects when the business will collect cash and spend cash and thus, establishes a realistic need for investments and/or loans. This clearly demonstrates the importance of achieving projected sales goals while working within the projected expense budget. In many ways, the Cash Flow Analysis is a blueprint for all business activities and thus, can be viewed as a mini-Business Plan by itself.

In this chapter, students learn how to use a spreadsheet software program and enter initial sales and resource requirements forecasts. Students then determine the viability of their plan by applying five simple evaluation measures. Based on the results of the evaluations, students revise the Cash Flow Analysis until it represents a sound working plan.