Forecasting Personal Cash Flow as a Small Business Owner

welcome back to the Clara CFO group Channel I am back this week talking about personal finances for business owners so as you know being a business owner cash flow can be somewhat unpredictable sometimes there's great money in the business and then sometimes there's not all that money in the business and what often happens is it's the business owner who will be the one that doesn't take home as much money as they need so cash flow on the personal side of things can become really unpredictable have those ups and downs and that is somewhat normal we want to stabilize that as much as possible that's part of the reason why we are trying to help you guys with your finances and that's what we're doing here on this YouTube channel is to hopefully have that steady paycheck coming in and the steady draws so that you don't have those ups and downs but until then and you know probably even when you do have consistent income we want to make sure that we are forecasting for our cash flow on the personal side of your Finance es so just like we do cash flow forecasting we love to talk about cash flow forecasting here on this channel for your business we can do the same thing on our personal side of our finances if that sounds interesting that's what we're going to talk about today and I'm going to dig into one of the tools that I've created that's completely free and it is available for you to download I will show you that in just a little bit so thanks for watching the Clara CFO group Channel if you don't know what Clara CFO is we are a fractional CFO agency and we specialize in B2B service companies who are looking to grow their businesses and be able to do that in a financially healthy and sustainable way so if that sounds interesting you can check us out at clarac cfo.com also we are providing videos like this for our audience which you know for people who never will work with us we still want to be able to bring you guys the information that we find to be really helpful as we're serving our clients so if you can't work with us on a fractional level for whatever reason this is another tool that is available to you so that that you can glean a lot of the information that we have gained from working with small businesses for years and years if that sounds good and you would like to learn from us please make sure you're subscribed to the channel cash flow now very simply what is cash flow it just means the money coming in and the money going out so when we talk about business it's the money coming into the business and the money going out of the business when we're talking about personal it's the money coming in to the personal side your personal side of things or your home life and then the money going out okay so there going to be different types of expenses between business and personal but we can basically manage our finances really similarly between business and personal now again we don't ever want you to be thinking about all of these finances in one cash flow you need to have a business cash flow and you need to have a personal cash flow okay what I've done is we have a free cash flow spreadsheet and you know a lot of people are sort of doing this on their own they're creating something they're tracking their finances in their in spreadsheets and they've built very elaborate models and things like that but if you have not done that and you would like some kind of tool we have already created one for you so you're welcome to download it and you can download it for free and you don't even have to sign up for our email newsletter list if you don't want to but if you do you'll get one weekly email from us which will tell you about our latest videos and our latest podcasts and also provide any additional news or things that we think you that you should be aware of if you get this cash flow forecast we'll put the link right here it's Clara CFO cash flow you can grab yourself a copy of that but what we're going to do is just get into this here in just a second some people are managing their finances through different budgeting apps so I mentioned them in our last video about personal finances I use Monarch which actually has a forecasting function so I used to do all of my forecasting in Excel and now I use Monarch for that but before I was using mint.com and they didn't have any forecasting function so I used mint for my budgeting and then I also use the forecast and an Excel so that I could see like what is what are things going to look like in the future and we forecast because we know things that we're going to need to plan for in the future so maybe you have a big trip you're saving for or maybe you have college for your kids that you're needing to help pay for or maybe you're trying to pay off debt and you're trying to figure out how much you can actually squirrel away towards paying off those different debts or maybe you just have a general savings goal maybe you're building up some kind of emergency fund so looking into the future and your cash flow will help you be able to make better decisions and you know see what you need to do what strings you need to pull in order to reach your goals okay so if you aren't doing forecasting in some kind of budgeting app something that is already linked to all your accounts you can manually create one and put it all into Excel and do it that way so that is what this video will help you do so let's go ahead and get into the cash flow for for casting spreadsheet right now okay here we are in the cash flow forecasting spreadsheet in this one if you've watched any of our cash flow forecasting videos you will see it it's a very simple template we have now we've added a personal tab to it so we have a business Tab and this is what we always show on those cash flow forecasting videos and then we now we have a personal tab so just as you can see here I'll do a highle quick overview it is all about tracking cash coming in from different income sources cash going out from different expenses and then cash coming in from or cash going out for things like paying off debts moving money to savings things like that and then cash coming in from other things that would not be income okay so we going to look at this from a personal side and what you'll see here let me get this moved over what you'll see here is we have I've changed these categories here and then I've changed the cash out to uh make sure that I mentioned some of the really common things that you'll have in your monthly personal budget and then we also have cash out and then we have cash in down here so I want to walk through just an example of how we might fill this out so you can understand how we can use this and how you could use this for managing your own personal finances how we want to start here and all of this is customizable that's the beauty of excel just type over anything that you don't want to use and then you can always click on a row rightclick and then insert a row if you want to add anything else so maybe you have a lot of different streams of income you can add in some different streams here or maybe you want to put all of your expenses line by line every single vendor you use and you want to put it in there really really detailed you can do that in here as well you can always select multiple rows rightclick and insert that many rows okay so Excel is super customizable so make sure that you do that and then just always be sure to check your formulas if you are making any modifications so that you are actually grabbing the right cell in order to give you the answers of the output of the spreadsheet so let's go ahead and say Here's how you start so what you're going to do is you're going to put in your cash at the beginning of the period so let's say that at the end of December you had $5,000 in your bank account that's what we start with on January 1 so and this would be your cash that you are saying this is the cash that's free to use to do things with so some people might have a savings account that is put on you know in a different account you might not want to put your savings account here in your cash flow because you're not really touching that you're going to be saving money into your savings and you don't really want to be you want to think about this as like your operating account and your operating money so hopefully that's helpful we kind of talk about that on the on the business side of things we want to do that on our personal as well so let's say you had $5,000 and then we're going to say that this is a two income earner family so we're going to say that one of the family members is making 4500 a month and then the other is making 3500 and then there's also a distribution and draws of 3,000 per month and then let's say they have a revenue stream of $50 a month from interest that they're earning and then maybe another 250 that's coming in from some Investments or something like that and then maybe there's another source of income like they're renting something out okay so they're making a total of 11,700 and income and then they would go this is this is all things that would be able to be found from their bank statement so you can populate this just like that and then now this is income out or expenses out is going to be the more tedious part of this but you know what we can say is we say hey we know that the mortgage is you know $2,300 every month and then we can pull that across because we know that that's basically going to be the same same with our wages up here same with our income streams they're going to be about the same might be a little bit of fluctuation here draws we're going to leave blank here because we're not exactly sure what the business can produce for us right now so I'm going to leave that blank and then utilities we know that they're about 120 a month child care expenses are $900 a month food is $1,000 a month cell phone is100 gas is 150 and healthc Care is 500 shop in we're going to do 200 entertainment is 100 pets 50 and then travel is 500 I'm just throwing some numbers in here so we can get some things populated and see what things are looking like okay so if this was the case right now we would be able to look and see okay what else do we have now this B let's just say that this business owner also has a personal loan that they're working on paying off and and that is $950 per month and then they also have a car payment that is $650 per month so we're going to get that in there and then let's say that they're putting $1,000 a month into or they want to put here let's do this they want to put $1,000 a month into their savings for longer term trips and just sort of extra spending in the future but let's see what that looks like right now okay so if we look at this now we've got income we've got expenses and then we have a couple loans being paid off and then we have some savings and right now we could put if they've borrowed any additional money we could put that in here but we're trying to not borrow any more money we're trying to pay off loans and then there's there might be some other you know one-off times maybe you get an inheritance or you get something just occasionally it's not necessarily like normal income that wouldn't go up here but this is sort of like other ways that cash might come into into your home in some kind of way so if that is the case here's what the situation looks like so if we in this first month where we had that extra distribution of $3,000 in this case the business owner would actually be in a net positive so it's positive numers is total changes in cash that they had $3,180 so at the end of the period they had their 5,000 up at the beginning plus the 3,180 that they were able to bring into the business or bring into the home and then so they had 8,180 after after the end of the month okay now what you'll see without that $3,000 distribution CH cash is looking pretty tight we can't really have there's not a lot of room for error here if we haven't budgeted really well for all these different categories okay you know maybe what you also want to have is you might want to have just a miscellaneous here for the things that you might have missed so in this case we want to leave $500 for kind of the fluctuations the things that you can't really plan for all the time so in that case we would actually be burning a little bit of money every month where we're in order to make the savings goal we're actually having to dig into our cash balance that we already have so at the end of 12 months we'd actually be at 4,660 so we'd have less cash than we had before you can also put in here that if you don't want cash to go below a certain number if you change this it will make red anything that is under that cash amount that you know anything below here will turn red so I really like this because what this helps us understand is it says okay well maybe in order to be cash positive and we don't want to go under $5,000 in our bank account maybe we can only save $700 a month or looks like we need to save a little bit of money on something else so let's see if we can get our food budget down to 950 rather than a th000 every single month okay or you know we can say hey I think I think with everything that we're doing we could maybe increase our hours a little bit get a few more hours at work and you know bump this up to something like 380 okay so then we can start to play around with like okay what are the levers that we need to pull to be able to achieve our goals okay so casual forecasting is really about here's what's happening now and what do we need to do in order to change the future State okay and this will also help identify if you said hey actually we've got we're saving for a really big payment and we want to you know make a $110,000 payment to our let's say student loans for example if that's the case and we need to pay $110,000 we can put that down in here and we can see what that does to our cash flow and can we we afford to do that this is like where you can kind of do that scenario planning and you can say what's realistic what can we actually do here and what does that look like over the course of like two two like one year or two years and then really with an Excel spreadsheet you can just keep dragging all of this information out further and when I say dragging I literally mean like taking taking these columns or these formulas and you can just pull them out by using this little plus sign and so you can keep going as long as you want like if you want to be forecasting you know 5 years into the future you can do that with a spreadsheet you just have to make some little modifications hopefully that's helpful and this kind of gives you a sense of why you might use this cash flow forecast but I mean really go and grab yourself a copy it's super easy to use I double check your formulas you can always double click on any cell and see what this is summing up to make sure everything's included here everything above give it a shot and let me know are you using some other tool to forecast your cash flow on the personal side of things I'd love to learn to see if there's anything else I don't know about I would love to hear what you guys are using and then if you do download this and it's helpful to you please I would love your feedback so let me know I hope that this would be a really helpful tool for you guys and that's why I've made it free and available to you so you can grab it again clar cfo.com slash flow I will also put the link in the description box below and I absolutely welcome your feedback and thank you guys so much for being here please share this with any business owner that you think might need help with their personal cash flow as well all right bye [Music] everybody

Channel: Clara CFO Group

Views: 905

Keywords: cash flow forecasting, personal cash flow forecast, personal cash flow, plan for cash flow, personal finance cash flow, personal finance for small business, personal finance for business owners, free cash flow template, free personal finance cash flow template, planning for cash, cash planning business, business cash planning, successful cash management, successful cash planning, forecasting, business finances, cash flow, personal finances, money management, owner's income

Id: 3iJf_ApTu7M

Length: 15min 45sec (945 seconds)

Published: Fri Feb 23 2024