How to Prepare a Cash Flow Analysis

Record of cash inflows and outflows is extremely vital in a company’s managerial system and future planning. Keeping a tract of your business transactions will inform you about where the cash has been spent and how much proceeds have in-flowed to the company. Cash flow analysis has a high importance while making investments or expanding your business. This analysis will be used in the feasibility reports made by the finance department regarding new product launches and how the business will be able to meet its short term liabilities as a going concern.


  • 1

    You should start from making an estimation of your annual income before you carry out the cash flow analysis.

  • 2

    Subtract any foreseeable operating losses from the total expected income. Once you are in the business for a reasonable time, it will be easier for you to predict the expected losses during the routine operations.

  • 3

    Add any other income you have already received and will receive in the future other than your business operations. This new figure shall represent your projected gross income for the coming period.

  • 4

    List down all the expenses you incur while carrying on your operations. You can categorise them for your convenience. Also mention the capital expenses in the list.

  • 5

    Compile all your administrative expenses i.e. office expenses, utility bills, advertisement costs and any other expenses regarding repair and maintenance. You should a record of all the things you use while running your business.

  • 6

    Any professional fees and taxes being paid should also be included in the cash flow analysis. Such costs include fees of accountants, insurance expenses, employees’ compensation payments, tax charges and unemployment insurances.

  • 7

    Total all the expenses you have written down and you will get the figure of the net expenses you require to run your business. Write down this figure under the effective income.

  • 8

    Calculate the interest expense you have to pay in the period. It includes any charges on bank loans, mortgages or any other financing source you have taken. Write the amount beneath the total expense figure you have calculated earlier.

  • 9

    Now subtract the total of all expenses from the effective annual income figure to analyse your cash flows. A positive figure in the end will denote that you will have this much cash left after carrying on your operations throughout the year. However, a negative figure signals warning and you need to take necessary measures to meet the cash flow deficit.

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