Trent Taylor | The 7 Step Monthly Cashflow REVIEW Process

This document outlines the process for reviewing your business cash flow, in 7 important steps. From checking your opening balances, reviewing your expenses, tracking against previous months, comparing to your budget, checking your assumptions, updating your cash flow in advance, and having someone external review your cash flow.

By following these 7 important steps, you will identify leaks in your business, and be able to make effective business decisions, to keep your cash at the bank growing.

System Architect: Trent Taylor
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System Details

1. Check your opening balances

  • Not only do you want to know what your cash is now, you want to know what it will be on a weekly basis 6-12 months going forward. (Projected cash flow).
  • The first thing to do in your review is look in your projected cash flow what weeks going forward, your opening balances are going below your minimum cash at the bank.
  • Look for high points and low points
  • For the ones that are not performing, trace back week by week and see where the bleeding is happening.

You want to have at least 3 actions you can do post this session to make your cash position STRONGER after undertaking the review.

The further in advance you can see, the more time you have to change things to ensure you fix them and keep a strong and growing cash at the bank.


2. What expenses are you going to have?

Look at your expenses in a bit more detail and examine what changes you can make that will have a positive impact.

  • Look for patterns of expenses increasing (on the month tab) and ask questions 
  • What expenses CAN you cull?
  • What expenses CAN you decrease?
  • What expenses CAN or SHOULD you increase?
  • What 3 actions should be done post this session to make you cash position STRONGER from this part of the review

Some expenses could be reduced by negotiation and asking questions of the supplier or people in the team, as to how they could be reduced or used differently.


3. Track against previous months

Look to see if you are going in the right direction or wrong direction – more often than not and understand why

  • We are looking for trends against previous months and also;
    • Did we improve on last month of THIS year?
    • Did we improve in the SAME month of LAST year?
    • How much has our cash in bank changed in the past 3 months and is it going in the right direction
  • Have you learnt from mistakes of the past?

Focus on the “right things” to stop bleeding in certain areas, so it is not a continual “leaking” point of the business!


4. How am I going against my budget?

A technique I often use in categories of my business that I have done poorly in, ala not met cash flow budget, highlight those particular cells with a specific colour font or highlight the cell with a colour

  • Go through 1 month and highlight in a “colour fill” the cell (say red if the income was less than the budget or if expenses were MORE than budget).
  • Do the same for the next month, but ONLY with the cells you filled from the previous month, to see if you reined in the expenses and did not do it 2 months in a row or did not go under the budget.

This section highlights and prevents you from making that same mistake again, so drill into making decisions to ensure you meet your budget the next month.


5. What assumptions have I made?

This out of all the steps is the thing you should only 2-3 times a year when you do not understand how a certain number in the forecast was created or why an item is in there for that amount.

  • Make sure you have captured them SPECIFICALLY
  • If assumptions are done, read through a couple and if they are a bit vague or you do not understand them, ask MORE questions to make each assumption more specific

Do this more in your first 6 months of using a cash flow, until you really start to understand your cash flow and business activities in sync better. Then the intensity of this really comes 2 months before and 1 month after the end of FY when you are resetting your cash flow projections for the new FY.


6. Update your cashflow and make changes in advance?

As you see things that are not right or do not match what you know is going to happen in the business in reality, then update and change your cash flow in advance.

  • It could be sales you will not make or extra sales you have made that you will realise in 7 weeks time for example.
  • When you see problems or things that you NOW KNOW will not happen, take them out of the cash flow.
  • If you need things to happen in the future, put the numbers in the future weeks, BUT then highlight that box with a font colour or the cell is itself coloured, so you know and it automatically highlights to you to keep focused on this as it is not known and needs to be created.

Remember that when you adjust any of your income lines, you need to adjust the “related” expense lines as very rarely do you receive extra income, without SOME FORM of expense coming your way also.


Have someone external look at your cash flow!

Do this once a quarter at a minimum!

3 examples of people you could show it to, that would provide you with value and ideas to improve are;

  • Accountant
  • Business Coach
  • Mentor

The value I have received from these conversations have been;

  • They have asked me really simple questions that I have not thought of.
  • I have had to explain things I take for granted which have given me a distinction I would not have gotten from reviewing it myself.
  • I have found holes in my cashflow as when I went to explain it and teach someone else, I realised I did not know something.