Skip to main content

How to calculate your total cash flow

Successful businesses have a full picture at all times of cash coming in and going out. An accurate snapshot allows companies to make wise spending and budgeting decisions. With a good cash flow calculator, businesses can save enough for future expenses, both expected and unexpected, and have more than enough funds to cover operating costs in the present quarter and beyond.

New businesses that establish an effective method of cash flow calculation upfront stand a much better chance of strong financial health in the short and long term.

Why you should know how to calculate total cash flow

Effective cash flow calculations help a business operate within its budget, work effectively, plan for resources, predict future expenses, and make realistic budget allocations for the next quarter and year.

Without an effective calculation method, it’s too easy for operating units to overspend, purchase items or services that aren’t needed, or spend well under budget. And when it comes time to planning next year’s budget, financial mismanagement in the previous year could mean less money to spend next year.

Businesses that know how to calculate cash flow are better able to manage accurate on-time spending and allocate resources. Ideally, total cash flow calculations should happen both in real-time and at regular intervals and reflect all areas and transactions of the business. 

Cash flow projections meeting

What is cash flow?

In simple terms, business cash flow is money coming in minus money going out. Cash might come in from customer purchase of products and services, as well as funds from financial grants or outside investors. 

Outgoing funds usually go towards a longer list of items, such as employee wages and benefits, facilities overhead, office equipment, utilities, insurance, product materials, vendors, and employee training, as well as unexpected expenses like legal fees, profit shortfalls during a downturn, and rehiring.

Using the cash flow statement

There are different methods, platforms, and business cash flow calculators available. Here’s a look at a cash flow method that works well for businesses. You don’t need to be an accountant to use it effectively! Excel and Google spreadsheets have many complex features to make the job easier.

A cash flow statement measures a company’s ability to pay its debt obligations and operating expenses. It breaks down incoming and outgoing funds by operating expenses, investments, and financing, across a specific time frame. These items are subtracted from a business’s net income.

  • Net income – net cash flow – operating cash flow +/– investing fees +/– financing = Total cash flow

Employees working at a call center

Calculate net earings

When calculating business cash flow, net cash should account for any non-cash expenses, such as depreciation and gains or losses from sales of assets or from accounts receivable. This net cash flow calculation should factor the total losses into the net income, and subtract the total amount for expenses. 

Calculate operating cash flow

This figure includes any money the business needs to spend to operate, such as payroll, outstanding invoices, inventory maintenance, annual fees, and more. Here, you would subtract any expenses and add any surplus from expenses you expected would be higher.

Calculate investing fees

Businesses spend money to become more efficient, produce more, and work smarter. These expenses could include new software, modernized equipment, or office renovations. 

Any money you spend on an investment to improve your business should be subtracted from the net income. Any gains from the sale of equipment, space, or permanent loss of a position, should be added back into the net income when calculating your total cash flow. 

Calculate financial activities

Financing activities include money that is owed, such as business loans, dividends, or stockholder payments, and equities. These should also be subtracted from the expenses side of the total business cash flow. Capital raising gains financing received from a bond would be a cash-in situation.

Businesspeople with financing spreadsheets

Using a cash flow forecast

It’s essential to use a total cash flow statement, as outlined above, but supplementing it with a forecast allows businesses to look ahead and predict how much they will need to spend to operate and profit in the future. 

A forecast usually happens quarterly, and yearly. With this data in hand and looking at past expenses, businesses can make better decisions about future investments, hiring, and future business plans. 

  • Beginning cash + projected inflows – projected outflows = ending cash

With the cash flow forecast, the current balance is added to the predicted cash inflows for the time frame, such as product sales, investments, or funding, then predicted cash outflow is subtracted, such as rent, loan payments, and vendors. 

These factors produce the predicted cash flow, a formula that produces more data to support accurate total business cash flow calculations throughout the year.

Editors' Recommendations

Jennifer Lindahl
Former Digital Trends Contributor
Jennifer Lindahl is an experienced writer and editor with two decades of experience in journalism, public policy, and B2B…
Supplies you need to start your local Restuarant
Freshly baked loaves of bread

All your life you have enjoyed the taste and the smell of bread. You started to make your bread from home during your spare time. Making bread has started to become a hobby that you enjoy. You enjoyed making bread so much, you decided to make a career from it. You decided to buy a building, and you want to create your recipes for pastry dishes. You want to share your homemade pastry recipes with your hometown and sell your homemade bread that comes in different flavors. You can also have a small section where your customers can buy your homemade bread loaves.

When it comes to starting your business, you need a lot of creative ideas to start your business. You want your place to be perfect, and you want to gain the attention of people passing by your pastry restaurant. You cannot just sell bread, but sell different varieties of pastries such as pies, desserts, sandwiches, and biscuits. When comes to selling your bread, you have to be creative with your recipes and create a menu that your customers get to choose from what recipes they will enjoy. You want to promote your business, and it depends on how your start your business and how you influence your customers.

Read more
Start your local cheese shop with these supplies
restaurant health code violations chef slicing delicious bbq meat at street market on table

You enjoy making your cheese, and you want to make a career out of it. You believe that everyone should be able to try your homemade cheese recipes. You want to sell your cheese locally in your beautiful hometown. You want to start with the simple tasks on what you need to start your career on the right path. You wondered what sort of items you need to start your business from scratch. You already purchased the building, but now you need the supplies to get you started. When it comes to your business you want to start with ideas.

In every local food business, owners had to start from scratch. Sometimes there are struggles when it comes to starting your own business. When it comes to the food business, it can be hard on how to start your business or when to start your business. You want your business to flourish, and you need some guidance on starting your business. When it comes to local business it starts with a lot of ideas and ways to figure out how to accomplish those ideas. You want your creative hobby with cheese to start well without any mistakes along the way.

Read more
Items you need for your awesome coffee shop
anda-printed-paper-coffee-cup-on-table

You enjoy making coffee, for the flavor, the hobby, and the warmth. Do you know you can make your brewing coffee flavors into a business? You suddenly have an idea of making and creating your flavors of coffee whether hot or cold. You live in an area where there should be a coffee shop on every corner. You want to fulfill your dream of owning your coffee shop. You want to start your day with the joy of giving your customers the energy and taste of their morning routine. You want your place to be special. You want to give a positive reason for customers to stop by.

You want to make it easy for you to start your coffee business. Making coffee is what you enjoy, and you want to be successful with it. When it comes to your coffee business, you need certain supplies to make it happen. You want a few steps and the supplies that can help you keep track of your career and make it succeed in the future. Coffee is how every person starts their morning routine or odd hours. Coffee is the energy drink for students and workers to boost their brain work. You can be that source that helps your customers' morning routines start fresh.

Read more