Determining Cash Flow Using a Profit & Loss Report

One of the most common ways to track your cash flow over a specific period of time is by using a Profit & Loss report. Here’s what you need to calculate Profit & Loss (and thus understand cash flow):

Income

This one’s simple and straightforward, especially if you have a steady stream of clients. It’s the total of all invoices paid to your business within a specified period of time, as well as any other income.

Taxes 

Always set aside a percentage of every payment you receive for taxes. In general, 20% should cover it, but check with your governing tax agency to be sure.

Expenses

This is the total of all purchases you made for your business in a specified period of time. Only money you spend on your business should fall into this category.

What to Do When You’re in the Red?

Increase Income
See if you can take on more clients and/or bigger projects to get you into the black and beyond.
Trim Expenses
Critically evaluate where you are spending more than necessary and pare back in those areas.
Raise Rates
As costs of living rise, so should your rates. Other factors to consider: Your experience, market rates and more…

Ready to Conquer Cash Flow to Grow Your Business?