How to Make Cash Flow with Five Easy Steps

Not limited to large companies, a local business, MSMEs, even personal finance are also required to have a financial flow report or financial statement cash flow.

How to make cash flow also not too difficult, if you already know about the income and expenses of the finances you manage. You can also make a report cash flow only by relying on Microsoft Excel.

Through this article you can find out the stages of how to make cash flow for company or for personal use. Check out the following discussion!

Why cash flow is very important?

Cash flow or cash flow is a record that regulates the entry and exit of money to meet needs. To make cash flow Actually you also don't need to be an Accounting graduate. Anyone can make a report cash flow now.

Cash flow A well-organized can be useful for personal or company, because with cash flow, you can see how cash transactions are going. So, you can plan short-term to long-term finances.

Financial planning can be done by looking for new investments, cutting expenses, or increasing sales production in a business. It is necessary to increase income,

For those of you who are just starting a business, report cash flow This is very important and must be started immediately because it is useful to see the financial projections of your business going forward

How to make cash flow?

Before going into how to make cash flow, you must understand about three main component cash flow namely operational cash flow from sales, salary expenses, water and electricity expenses, to the settlement of non-bank receivables. 

Then there is the so-called investment cash flow which as the name implies comes from purchases, sales, to investment profits, and the last is funding cash flows such as stock purchases, funds from investors, and dividend sales.

Next is how to make cash flow, quoted from Harvard Business School, there are five ways or stages of making cash flow.

1. Determine the beginning balance

Before compiling a report cash flow, you must determine the beginning balance of cash in each reporting period cash flow. The main balance is determined from the income statement for the same period.

2. Calculating cash flow from operating cash activities

This stage is very important because it shows the amount of cash you have made either from sales or from personal salaries. Calculating operating cash flow can use the direct method and the indirect method.

• Direct method

Direct cash flow or the direct method uses all sources of cash such as income as well as cash disbursements such as paying suppliers and employee salaries. 

• Indirect method

Indirect cash flow is a method of preparing cash flows in which the net profit and loss of a company is adjusted first in the form of a balance sheet which will later enter into the component of operating cash flow. This method will also divide into three different components, namely operating cash flow, investment cash flow, and financing cash flow

3. Calculate cash flow from investing cash activities

After counting cash flow From operating cash activities, you must calculate the money that comes from investing activities such as selling and buying property.

4. Calculate cash flows from financing cash activities

This stage will calculate all the details of funding from debt and equity financing, in other words you must collect cash first before paying debts to banks or investors, even including the interest paid.

5. Determine the ending balance

After calculating all components of cash flow, you can determine the ending cash balance according to the closing of the reporting period cash flow.

By following all the ways to make cash flow will result in net cash flow or clear cashflow, this report will show the amount of cash earned and issued by the company or issued by personal needs. Cash flow clean, of course, there are two types, namely: cash flow positive and negative cash flow.

• Cash flow positive

Shows the company has more income than expenses.

• Cash flow negative

This means that the company's cash outlay is more than the revenue it generates.

However, how to make cash flow this will be adjusted to the company or individual respectively. You can also use accountancy Nesto to make it easier to make reports cash flow.

Sumber: hbs.