Using Cash Flow Templates In Excel To Improve Your Harlem Business

July 25, 2023

Personal financial management relies on knowing your overall cash flow.

Cash comes into and out of a business all the time, and if you don’t have a firm understanding of your liquidity, it can cause you to make bad business decisions.

If you haven’t calculated your cash flow yet, we’re going to show you how to begin making use of a template using Excel – or similar programs.

Selecting the Right Template for Your Business

You’ll find numerous Excel templates, many of which are free, that have been designed to help you better understand your business’s finances. For example, you’ll find templates that have all of the columns and calculations to be able to input numbers for:

  • Income statements
  • Cash flow statements
  • More

When reviewing the template, your first step is to ensure that the data generated is accurate. Once you know the template was reviewed and shows the right data, you can then check to see if it:

  • Provides all of the data your company needs
  • Offers advanced calculations

If you have an in-house accounting team or hire someone to handle your accounting, you’ll want to have them review the template for you.

Templates can and will help you master financial modeling.


What is financial modeling?

Financial modeling is the process of using a spreadsheet, such as Excel, to create a forecast of your business’s financial performance. You’ll need to prepare the following to perform accurate modeling:

  • Balance sheet
  • Cash flow statement
  • Income statement

Once you have all of these statements, you can then begin to forecast your business’s financial performance to:

  • Value your business
  • Raise capital
  • Budget for the year ahead
  • More

Customizing Templates to Fit Your Needs

Personal financial management is personal. Templates provide you with a good starting point on how to calculate certain financials. However, you’ll come to a point when you need to begin customizing your template.

How?

It’s best to work with a professional accountant who knows how to create certain statements or projections so that they can verify that the template output is 100% accurate.

If you have a firm understanding of accounting formulas and how to analyze your cash flow in Excel, you can begin customizing the template to allow for:

  • Multiple forecasts to be generated at one time to allow for faster report generation
  • Pull data from other sheets to make it easier to generate multiple reports across different sheets

If you want to customize the template further, you’ll need to do some due diligence first. For example:

  • Review the reports or data that you calculate that are not in a template
  • Start adding in new functions that will help you better customize your file
  • Test the template multiple times to ensure that all changes you make are accurate

Reports and forecasts for other stakeholders need to be easy to read and understand. You may want to consider adding in charts that can be reported on separate sheets that pull data from the main sheet.

Charts and graphs are two of the easiest ways to be able to view data rapidly.

Additionally, if the template is used to generate reports for others, it is worth adding your branding to it. You can add the company logo, graphics for the reporting period and other assets to make the template look more professional.

Tips for Effectively Using Templates

Templates allow you to better understand your financials faster and with greater accuracy. If you’re just starting to use a template, consider the following tips to improve them:

  • Forecasts and projections are often inaccurate. Creating a high and low forecast often provides the best results because you’ll better understand your “forecast range.”
  • Check all of your input data for errors because one of the main reasons for inaccuracies is bad input data.
  • Use templates for short-, mid- and long-term analysis. You can use a template to learn what your net income forecasts will be in a month, six months or two years from now.
  • Historical data should be used as often as possible to better understand how your business has evolved. For example, if you’ve had a steady growth of 15% per year for the past five years, there’s no reason to assume that this year will be any different unless drastic changes occur.
  • Avoid changing any key rows and columns in a template that has functions that are crucial to the statement. If you erase or alter these functions, you risk the template being inaccurate or not calculating properly.

Templates are meant to help you create cash flow statements and forecasts faster. If you want to gain even more flexibility, you can ditch templates and use platforms that help you better understand your business’s cash flow.

In Conclusion

What is financial modeling? It’s one core element of financial analysis that you can use to forecast your financials with greater accuracy. You can use modeling to better understand your future liquidity and make smarter business decisions.

This content is part of the HWM Partnership.


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