So, when we forecast a cash flow, we don't like to think too far in advance, although you can do a good projection of a year-long cash flow. But when we get into the later months, we are really doing hypothetical. Unless you have a very streamlined reoccurring type of business, you just never know what's going to pop up. But what can be super useful is using a 13-week cash flow. So just a very couple of months ahead of time really dialing in when you are going to see that money coming in and when you are going to see that money going out. So it's yeah just looking at that trying to see if there's going to be any problems that arise. If you are feeling very cash tight a lot of times like different periods of the month, we can create this cash flow to really streamline and review what might be happening with your cash and can we shift things around to make your anxiety go down and feel better about where your bank account lands any time of the month and catching those things before they actually happen. So we definitely see it in our CFO practice. We use it with our business owners and sometimes lenders like to see these depending.
So how do you create a cash flow forecast? So the first thing that we're going to do is start of course with the beginning cash that we have. So any cash that you are holding that you can utilize for money going in or money going out we want to look at that. So and this is this is not credit cards or anything like that but we want to look more on our physical cash. So bank accounts, savings accounts and if you have pending maybe you've received some funds in a check you just haven't taken those to the bank. Those are part of our starting current cash. But we really want to dial this in and make sure that our accounts are reconciled, that we're using using a very clean, clear number so that the rest of the forecast can truly be how it should.
The next thing that we're going to look at is all of the inflows that we have. So, a lot of times companies will have invoices and due dates for these invoices. And hopefully you have customers that are landing on these specific due dates, but sometimes you don't. So, it's really gathering up all of your invoices that you have, seeing when things are due, and kind of adjusting to see, oh, okay, well, we see that something is coming due in 4 weeks. Are we going to actually receive that cash or are we going to see it maybe in week five instead? Or maybe you have some sort of discount available and this particular customer likes to pay and get that discount. Well, we actually see that in week two instead of week four. So, this is really where we're putting specifically where we're going to see the cash. And this can be any refunds that you know are happening. Maybe you have a tax return that will be coming and it's going to be showing up in week six. We'll want to put that in week six. If you, yeah, like going through your customer payments, if you have any loans that you have some capital that's coming in, maybe you have a partner that is lending money over and they're going to get it next week. So, you can input that in next week, it can't help us this week, but it can help us next week and moving forward. And so, just yeah, focusing on specifically what date this is coming in. And I guess let me back up. When I say week, I mean you're choosing a specific I like to choose Sunday through Saturday or a Monday through Sunday, but you want to look at your cash forecast at the beginning of the week, not at the end of the week, because this is where all of the bank transactions are coming through and making sure that things are paid. So yeah, just kind of reviewing all of all of the dates and timing of the cash.
Next, we have our cash outflow. And so this is specifically when things are going to be due. So we have our regular payroll. Does that employees have direct deposits and they're paid every Friday, but it actually comes out of your bank on a Wednesday? So you need to know that information. You need to make sure that maybe you have that money the week prior to. So it comes out on week five, it comes out on week seven. So you need to actually have the money on week four and week six. Do you have loan payments? This is where reoccurring things are showing up. Any subscriptions that you may have, your tax payments coming in April and June and September. If your owner is doing owner draws on a regular basis, when do these come out? And also, we should have some bills that have specific due dates. If you have any lending that's any terms with people, so if you can pay a net 30, net 60, you want to make sure that you're inputting those specific times. And at this point, you're saying, "Okay, yeah, this should be about when we're pulling this money and putting it in those specific weeks." This is where you can really see where you might have some problems coming up.
And then yeah, this is where we actually what is this telling us? So we have the cash coming. We have the beginning cash all of we're going to add in our cash that is coming in our invoices payments from any loans or anything like that. And then we have our cash out. We're going to subtract that out. And that leaves us with our ending cash for the week, what we think may or may not happen. And so then that's week one. And then week two is your beginning your starting cash is going to be the previous week's ending cash balance. That's going to be your beginning week, the following beginning week. And we'll look at an example here very shortly. But as you see this kind of going through, you can really see, oh, I'm seeing that we're totally fine for the first month, but we're actually having a huge problem in week five. We are in negative $2,000, $10,000 in the bank. We won't have money. What do we need to do? Can we promote some invoices coming in? Do we need to have a some money inserted from business owners or do you maybe need to hold off on paying some of your vendors? But we can really guide and see this 13 week and where we need to shift things around.
We don't actually shift anything around until we do all of the placements for we're 90% confident that this is when cash in will hit and then we're 90% confident that this is when cash out will hit and then from there we're analyzing do we need to shift things around here or there to make sure that we're always positive in the bank account. This is kind of an example of a cash flow that you can see. So here we have our beginning balance. We have some checking accounts. We have a PayPal account and then payments that are still pending. This particular one we don't have any of those. So but we have our beginning cash here. And then this current week is 31. So each week, 7 days, we have this rolling 13-week timeline that we can see. This top line, we're going to be inputting when we know that we're going to be receiving cash. And then all of these maybe adjustments and unexpected things that we know are also going to pop up that maybe our software that information isn't there. So if you have invoices, maybe you just have a one-time occurrence or something like that. Then down below we have our bills here as well. Again, say doing the time rhythm of what's already within QuickBooks if you have if you're entering in bills. And then adding adjustments along the way. You're adding in your different vendor bill or tax bill. So in week one, we have, you know, we start with our beginning cash. We add in our week one information. I need to get a better mouse. That's okay. And then we have our bills down here. And so at the end of the week, although at the beginning of the week we start with $14,000, we can see at the end of the week we're ending with 5600.
And as the time goes on, we can see that we actually are in a crunch here around 3:22. So in a couple weeks in four weeks. So what do we need to do in order to shift that? Now, it may not be a lot, but it is enough for us to be like, "Okay, well, we might want to maybe we can't pay in full the vendor bill. Maybe we want to pay $3,000 instead of $4,000." And then we can also see that as time goes on, we're hitting all of these negatives. And so, we really want to take into account, you know, how can we get more money coming in so that we can pay our bills. So, yeah, why it matters? It matters so because we can forecast out and show when cash problems are really going to arise. So, it's important to stay on top of this and really look at it on a regular basis. It's something that it does take some time to set up, but once you have a rhythm and a system in place and how to update it, it can only take about 15, maybe 30 minutes as you're analyzing and moving things around to really have a good grasp on what's going to happen in the next week. It helps you plan and spend, not have these crisises, and it also gives you confidence in making sure that you can hit your payroll and your employees are staying happy. You hit your payments to your vendors, that they're staying happy, and that you have that you have money all all around. Revenue is really important, but what really matters and keeps the doors open is going to be that cash. Once you know your numbers, you can own your future. That's it for today. Thank you so much for joining us. I again am Jenn Shaw. I'm with All Accounting. And if you are feeling like this is exactly what you are needing, but you just are unsure exactly how to set this up, we are certainly here to help with that, to guide you along the way. We are your accountability buddy people that will help you really dive into your numbers on a regular basis to keep you consistent and keep showing up. I hope to see you next week and enjoy your weekend.
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