The same way I'll show you how to know it before you go away

Hey there Reader,

I don't know about you, but I don't want to be monitoring umpteen different measurements while I'm supposed to concentrating on something else, whether that's taking care of my mum, brushing up on my dance skills, or perfecting my suntan. Luckily, there's no need to for me, or you, to do that. If you want to know how well your business is doing while you're away, you just need to know the answers to these two questions:

Will there be enough money in the bank?
Are my customers/clients getting the value they should be getting from my business?

And both of these are really about monitoring and managing flow. The first is about cash and how it flows through your business. The second is about work that is of value to your clients, and how that flows through your business.

If you know these flows are working well before you take a longer break, you'll hardly need to worry about them at all while you're away.

So over the next couple of newsletters I'm going to walk you through how to map, then manage these flows.

Today, I'll start with the easy one: cashflow.

Why you should map cashflow
How to set up your cashflow map
How to use your cashflow map

Why you should map cashflow

It doesn't matter how big your profit margins are, if you run out of cash, your business runs out of road. And this is depressingly easy to do if what you track is a level - the amount of money in the bank - rather than how money flows through your bank account. All it takes to bring your business down is an unexpected mismatch between when money comes into your business and when it leaves.

The first step towards controlling the flow of cash through your business is to map those flows.

A simple way to do that is with a spreadsheet.

If you already have your own cashflow map set up, and you use it regularly, congratulations, you can skip the rest of this newsletter. If not, read on.

How to set up your cashflow map

You could of course start your own from scratch, but I've also created a template sheet ready for you to copy and download for yourself https://docs.google.com/spreadsheets/d/1HBC_58x9PgVAcu6c-vvUMYwYGotOZrpoImpT3Z2Twrg/edit?usp=drive_link. It's not sophisticated. There are no complicated formulas. You do have to be careful though. However, I've used it ever since I set up my business, and it's helped me sleep soundly and enjoy weekends ever since. That's because it helps me see what's happening to my bank account far enough ahead to take action if necessary.

Here's what it looks like:

Here's how to populate it:

On the date you want to start recording your cash flow, enter the value shown in your bank account as the 'starting balance'.

Add in all the incoming flows you're expecting over the next month:

Add in each payment you know is coming in, on the date you expect it to arrive in your bank account. Be conservative. I never enter income until I know it's coming, which is really only once I've invoiced for it. This is where making payment part of the process really pays off.

If multiple payments are due to arrive on the same day, insert more rows into your spreadsheet, then enter each payment with the same date. You will need to select the 4 columns that update automatically (IN, OUT, CUMULATIVE TOTAL, BUSINESS ACCOUNT BALANCE), and, starting from the original row, drag down so that the formulas are refreshed. You'll see the figures change as you do this.

If your business is VAT registered, then for each payment you've entered that is subject to VAT, check the 'VATable?' box in the row. The VAT field will automatically calculate how much is due, and multiply it by -1 ( because you will need to pay it). The default is the UK 20% rate.

Add in all the outgoing flows you're expecting over the next month:

Add in each spend you know is going out, on the date you expect it to leave your bank account. This will usually be the due date on your bill or invoice.

If multiple spends are due to go out on the same day, insert more rows into your spreadsheet, then enter each spend with the same date. You'll need to refresh the formulas again.

If your business is VAT registered, then for each spend you've entered that is subject to VAT, check the 'VATable?' box in the row. The VAT field will automatically calculate how much is due and multiply it by -1 ( because you will need to claim it back). The default is the UK 20% rate.

You should end up with something that looks a bit like this (with less red in it of course):

Repeat this for as many months ahead as feels right for you, to get a starting picture of how comfortable your position is. I've included 13 months from May 2026 to May 2027 in the template.

As you can see, the template sheet includes a Monthly total row, that sums up the 'AMOUNT', 'IN', 'OUT' and 'VAT' columns, and carries forward the 'CUMULATIVE TOTAL' and 'BUSINESS ACCOUNT BALANCE' values.

Obviously the higher and more frequent your incoming flows are, the bigger the gap there will be between what comes in and what goes out each month. And the less you have to worry...

As long as you remember to include all your outgoings...

Remember to include outgoings that only happen once, twice or a few times a year, such as:

Business insurance
Memberships
Subscriptions
Services that are charged for quarterly.

Simply add these in individually on the dates they'll fall due.

If you're VAT Registered, remember to account for VAT

One of the things I've seen catch many small businesses out is VAT.

Remember, if you're VAT registered, you become a tax collector on behalf of HMRC, paying them the net amount of what you are liable for, and what you claim back from suppliers. Since the return and payments are quarterly, it's easy to build up a big bill if you're doing well. And if all you look at to track how well you're doing is your bank balance, you'll be taken by surprise.

If you're VAT registered, you can use this cashflow mapping sheet to estimate how much you'll pay and include that outgoing at the right date. So at least you'll see it coming. It's a bit fiddly, but here's how it works:

As you can see, the Monthly Total row, sums up all VAT for the month. That's the net amount you'll pay or claim. Red you pay, black you claim.

Now, find the date in the cashflow sheet by which you must file your VAT return. This is currently the 7th day of the second month following the end of your VAT Quarter. For example, if your VAT Quarter ends in September, the filing date for the return will be the 7th November

Add a row for paying/receving VAT. The AMOUNT equals the monthly VAT total for the three months of the VAT Quarter. For example, the value for August = Monthly VAT total for July + Monthly VAT total for August + Monthly VAT total for September:

Of course the actual VAT figure may differ from this when you or your accountant actually produces the return. But you should be close enough to that actual amount to be able to pay it. Once you know the actual figure, you simply replace the calculation with the real amount.

If you're a limited company, remember to account for Corporation Tax

If you're a limited company, you'll be liable for Corporation Tax. Since, like VAT, this gets paid a long time after you've earned it, it's easy to be taken by surprise when the bill comes in.

So the Cashflow Mapping Template also includes an ANNUAL TOTALS row, that adds up all the monthly figures to give you totals for the year., carrying forward balances as before:

As with VAT, you can't predict exactly how much you're going to pay, but you can estimate it and include it in your cashflow.

Find the date any Corporation Tax will be due, and insert a line for it, making sure all the formulas are copied across as usual.

For the AMOUNT field, add together the Annual Total for 'OUT' and the Annual Total for 'IN', then multiply the result by your expected tax rate. Finally multiply the result by -1 to get the actual payment. A crude, but useful placeholder that will help you to avoid nasty surprises:

How to use your cashflow map

Once you've created your spreadsheet and mapped out all the incomings and outgoings you're certain of, take a step back and look at where that central river (BUSINESS ACCOUNT BALANCE) turns red.

If it's never, great. If it's next year, you probably don't need to worry yet.

But what if it's next quarter, next month or next week?

This is where having a line-by-line map of your cashflow really helps. Because when you can see the problem, you can do something about it. And the further ahead you can see, the more choices you have for action.

Here are some questions that may help you to generate some ideas:

Can we bring more income in before then?

Are there any invoices outstanding? Chase them! Better still automate how you get paid. The cost of something like GoCardless is far outweighed by the certainty it brings and the cost of chasing.
Is there work done, but not invoiced for? Raise the invoices! Better still, make getting paid part of the process and automate it.
Is there some offer we can make to existing clients that they could take up quickly? They already know and trust you, so need less 'warming up'. They might even appreciate being reminded of all the things you can do for them.
Are any prospects close to enrolment? Could we speed them up with a special offer, or even just some attention?
Could any existing or past clients refer us? There's no harm in asking, and you might be surprised. Even better, make it a regular practice to catch up with them, and ask for referrals when you do.
Can I put some of my own money into the business temporarily? Remember to include it as incoming. Record any resulting outgoings too.
Will a family member or a friend, or even a supplier, invest or lend? Make sure you map it all so you can repay on time.
Can I agree an overdraft facility? If you do this to get over a hump, do be careful to avoid using it as a permanent extension to your bank account. The bank will let you do this, after all it earns them interest and in the worst case they get your house.

Can we move any incoming money to earlier in the month/year, so it arrives before one or more outgoings?

Could we change how we get paid, so that some money comes in up front? You could charge a deposit that covers your costs, so that final payment represents your profit. You could get paid in multiple stages, rather than at the end of Keep Promise. Those stages could be tied to key deliveries, or they could simply be monthly, or even weekly.
Could we move the date of a repeating invoice forward in the month?
Could we do that for all repeating invoices?
Could we shorten our payment terms (at least for future clients) so that their payments arrive before we have to pay any costs incurred on their behalf?
Could we make sure we invoice when we start the work, rather than at the end? That way it can have worked it's way through the client's system by the time it's due.

Can we remove or reduce any outgoings, even if only temporarily?

Could we reduce some of the services we receive? Or the frequency with which we receive them?
Could we pause some of the services we receive?
Could we cut down on the quantity of some supplies? Or the frequency with which we buy them? Or the quality of things we use internally? Could we pause purchases until we've used up most of our stock? Could we be more mindful of what we use?
Could we switch down to cheaper subscriptions? Or even free ones?

Can we move any outgoing money to later in the month/year, so it arrives after one or more incomings?

Could we pay bills when they are due, rather then when they come in?
Could we switch to paying monthly or even weekly, rather than annually? Although this often costs more overall, it can really help with cashflow because it gives you more time to attract and enrol new business. It's worth asking a supplier, because regular, predictable cashflow usually helps them too.
If things are really tight, could we even pay some bills a little late? Just so they come after income that covers them? Not fellow small business owners, not government, but maybe some bigger suppliers. And only in extremis. I do know of business owners who don't pay until the supplier squeals. Which is why it if you're a supplier to someone else, it's a really good idea to make getting paid part of the process and automate it.

If you'd like some help setting up or using your cashflow map, just get in touch.

If I've missed something, do please let me know so I can fix it.

Obviously, as a successful business, I expect that your central river is likely to be black for a good time ahead. But having a cashflow map that actually shows that is concrete evidence that you don't have to worry, and a vital early warning system of trouble ahead if things change.

That’s it.

Here’s what you learned today:

There are two flows that really matter to your business: the flow of cash in and out of your business, and the flow of value from your business to the people you serve.
Mapping the flow of cash ahead of time, gives you a concrete answer to the question: "Will there be enough money in the bank?". And if the answer to that question is "No", also gives you the information you need to do something about it - before you hit the rocks.
When you can see that you'll be 'in the black' for as far ahead as is comfortable for you, you can go away for a week, a month or a few months, knowing you don't have to keep checking your bank balance.

So, if you don't already map your cashflow, start today.

Here's the template again: https://docs.google.com/spreadsheets/d/1HBC_58x9PgVAcu6c-vvUMYwYGotOZrpoImpT3Z2Twrg/edit?usp=drive_link

Next time we'll look at the flow you probably haven't heard of - the flow of value to the people you serve.

If you'd like to read ahead, here's a book I recommend:

"Freedom from Command and Control - a better way to make the work, work." by John Seddon.

https://www.awesomebooks.com/book/9780954618308/freedom-from-command-and-control/used

Also plenty of copies on ebay.

Thanks for reading!