Master Your Business Cash Flow

1. Intro : Number one reason that most businesses fail is because they eventually run out of cash. And the most unfortunate part of that statistic is that there are some very simple methods and strategies that you can use to better improve and manage your cash flow, as well as predict where that cash flow is going to be up to 12 months in the future. In this course, I'm going to walk you through those strategies and methods, and I'm going to give you the tools that you need to be able to predict and manage and forecast your cash balance up to one year in advance. Hello, everybody. My name is Zach Hartley, and I am an entrepreneur and investor from Calgary Alberta, Canada. And I'm currently running two businesses where I apply all of the strategies and principles that I am about to teach you. My first business is a three D printing farm that is about to cross $1,000,000 in annual revenue, as well as a social media business that currently generates several hundred thousand dollar in revenue per year. Prior to that, I ran a manufacturing business where we bought wine barrels from California and whiskey barrels from Jack Daniels, and we converted them into furniture and decor. And in that process, I not only had a $16,000 per week payroll every two weeks. I also had to spend $30,000 per truck load of barrels and $6,000 on rent. And when all three of those expenses lined up in the same Cash flow was my number one priority. So I have learned a lot along the way. I have gone through the School of Hard Knocks. I have made a lot of mistakes, and my goal in this course is to help you build a cash flow spreadsheet that will help you manage and predict where your bank balance is going to be at up to 12 months in the future. And it is also going to, most importantly, relieve your stress as an entrepreneur. It is going to help you plan out your business, and it's going to help you make sure that you never run out of money. I'm going to give you the strategies and the principles that you best manage your money. I'm also going to give you a tool that you can use to set budgets for your business, and we are going to learn how to forecast and plan for the future. It's going to be very exciting. And here's what you can expect. Number one, you are going to get an inside look at the strategies that I have used to build my businesses. I am going to actually show you my cash flow spreadsheet for my three D printing business. I'm also going to give real life examples of what other companies have done, and I'm going to give you actionable first steps to get your business started and get that cashflow spreadsheet up and running. We're going to get an entire template that is going to be in the course project, and what I want you to do is use that template and adjust and mold it to your business so that by the end of the course, you have a 12 month template, a 12 month, basically cash flow spreadsheet that you can use to scenario plan to manage and to predict where your bank balance is going to be at in the future. Now, with regards to that class submission, and that template that I want you to fill out What would be amazing is if you submitted a screenshot or a copy of that cash flow spreadsheet as your project. But I can understand if you want to keep those numbers secret and you don't want to share them publicly. In that scenario, what I would ask is that you share a website, a link to your products, a link to your social media, whatever it might be so that we can follow and like and support you and build a community of the entrepreneurs that have been through this course right now and that are going through it in the future. The idea here is that I want to support you. I want to follow you. I want to follow your business and see how things going. So if you could share that, that would be absolutely amazing. And if you have any feedback for me, I would read every single comment, I read every single review, and I would love if you could tell me that you liked the course, you didn't like the course, or here's how I could improve the course. It would mean the world to me, and it will help me make this a better product as I make more and more content. I sincerely appreciate it. Now, if you want to follow me or learn more about my businesses and see my content, I post a lot on YouTube and TikTok. I also post on Instagram, X, and LinkedIn. You can find me at Zach Hartley online, and I look forward to connecting with you there. But without any further ado, it's time to start talking about cash flow, so let's dive right. 2. What is cash flow: Alright, everybody, welcome to the first lesson. In this video, we're going to talk about what is cash flow and why is it so important to your business? We're going to keep things very simple to get started. So let's jump right in. Okay, so my definition of cash flow and what I am referring to is the movement of money in and out of the business. What I want to know about is how much money is coming in this month, how much money do you have and how much money is going out this month so that you can better forecast and manage your business. Now, The reason that this is important, and the reason that you want to understand and manage your cash flow is because you could be a profitable company, but you could still run out of money. What I mean by that is maybe you're running a good business and you're making a couple thousand dollar per month. But if you go out and you buy a bunch of equipment or you try and buy a bunch of upgrades or you want to renovate your shop, That's going to cost you money, and you might run out of money if you're not budgeting and planning and forecasting for it. And that is where your cash flow statement comes in handy. Secondly, you need to have cash in the bank for large purchases and emergencies. Your cash flow statement is going to tell you how much money you have in the bank and is going to help you plan out and prepare for those purchases and emergencies. It is also going to help you with timing and forecasting. You get better at managing your cash flow, you're going to get better at forecasting into the future, and you'll be able to run your business more effectively because you'll be able to order the right amount of inventory, or you'll be able to hire the right number of people, or you'll be able to basically just plan ahead and get ahead of the business instead of trying to play catch up. So that's the whole goal here, and that's why this is so important. How do we do this? How do we actually build a cash flow spreadsheet? How do we actually manage this? How do we make decisions, and how do we put this all together? Well, it's very simple. We are going to build an Excel spreadsheet. I'm going to walk you through how to do this. I'm going to give you a template. I'm going to give you an example. Where you're going to use my real business, and I'm going to walk you through everything that you need to know. All you are going to have to do is enter in your business data, and then you need to analyze and adjust based on your real operations. So I'm going to try and give you the best structure that I can? You may need to make some modifications and adapt it to your business. This should be a tool that you can use to figure out exactly how much money you're going to have in the next few months, hopefully one full year. Now, to do this, we are going to do everything on Google Sheets. You can also do it on Microsoft Excel. You will need a basic understanding of how to use these softwares, though. The only things that you need to know are to add to subtract, you need to merge some cells. You need to add some color. You might need to include a hyperlink, and maybe you need to put some border on some cells. It's not going to be super complicated, and if you don't know how to do this, you can watch a few YouTube videos or check out a course on any of these platforms. And it is going to walk you through everything, but you do need to have just these basic skills before you move forward into this course, and before we start to really use that Google sheet. So just as a heads up, if you don't have that right now, I will link in the resources a couple of good YouTube videos. I will teach you everything you need to know. It might be good to pause this and check that out. Otherwise, let's continue here, but this is what you will need. Now, in my opinion, your cash flow spreadsheet is going to be one of the most important tools that you use for your business. The reason is because it's going to help you with budgeting for your expenses. Forecasting your revenue and almost all of your finances, if you have a banker that is going to need to see this information for a line of credit or a loan or a financing, they're going to ask to see this information, and if you have it ready to go and up to date, it's going to look very, very professional. You can also use it for decision making and scenario planning. So if you know how much money you have in the bank six months from now, you can figure out if you can afford that equipment in three months time or eight months time or whatever it might be. And so by knowing what your bank account is going to look like in the future, you can make better decisions right now, and you can also plan for different scenarios. If this supplier shuts down or this guy goes bankrupt, or we have a huge spike in sales over Christmas. Whatever it is, you can plan those different scenarios and see what effect it has on your cash flow and. So there's lots of huge, huge reasons why this is so important, and we are going to basically give you a tool that can help you in all of these decision making areas. Now, in summary, for this video, your cash flow statement is a tool that is used to plan your business, manage your money, and make decisions. This course, I'm going to help you build that tool. I'm going to walk you through how to build it, how to use it, and how to make decisions based on the information within that spreadsheet. And so I'm very excited about this. This is a super important part of business that they don't teach anywhere else. I have learned everything in this course through the school of Hard Knocks and experience, and I can't wait to share it with you. So let's keep on. 3. Cash flow structure: Alright, in this video, we're going to talk about how these cash flow statements are structured. How do you actually read them? How do you understand them, and how do you kind of look at the information? So, let's jump into this. The general idea here is that we are trying to figure out what is our starting bank account balance, meaning how much cash do we have in the bank, how much money's coming in, and then what do the expenses look like, and what does our bank account look like at the end? And so here is how it is structured. You're usually going to have your starting cash balance at the top, and then you're going to have the money that is brought in that month. After that, you're going to subtract your cost of goods sold. This is all of the expenses associated with actually manufacturing that product, or if somebody else is manufacturing it, it's going to be your cost to purchase it from the manufacturer. Then you have your operating expenses. This is going to be things like your management salaries or your rent in the warehouse, whatever it might be. This is everything that is an expense to the business, but isn't directly associated with the cost of goods sold or with the manufacturing of the product. At the end of that, you're going to have your cash inflow or outflow. And this is basically your profit or loss for the month. So it's a cash inflow at the end of the month, if you generated profit or it's an outflow if you lost money, then at the end of it, you're going to have your ending balance. And so your starting balance plus your cash inflows or minus your outflows are going to give you your ending balance. And so This is the general structure here. It's going to show you what you're starting with, the money that you brought in, the money that is out, the actual plus or minus of those transactions, and then the final impact on your bank account. That is what we are looking at here, and that is how this is going to be structured. Now, when you look at this on an Excel sheet, here is a very, very simplified explanation. So let's say that we have $5,000 of cash in our bank. We bring in $2,000 worth of revenue by selling our product, spend $100 on the cost of that product. That leaves us with a gross profit of $100 here. And then we have $500 in operating expenses. This would be our overhead here, maybe our rent or our management wages, whatever it might be. That gives us total operating expenses of $500. Obviously, this would usually be multiple line items because it would include your Wi Fi and your utilities or your parking, whatever it might be. And then at the end of it, we have our cash inflow or outflow. Here it is an inflow of $500, because we brought in 2000. We spent $1,000 on the product, and we spent $500 on our operating expenses that left us with an inflow of $500 here, and our bank ending balance is now going to be 5,500, because it's our starting cash balance. Plus the inflow or outflow gives us the ending bank balance. And so very, very simplified example here, but it breaks down all of the different aspects of the things that we would want to know and analyze as a business owner. Now, this is just the general structure here, and this would just be for one month in January of 2024. And then what you do is you basically extend this out for the entire year, and you basically go the starting cash balance of February. The ending cash balance in January. And so if you notice this, these numbers will always be basically the same the next month. So the next month's starting cash balance will be the last month's ending balance. And then it goes through the exact same process of money in money out. What is the difference there? Was it a positive or a negative? Then what is your ending bank balance? And so if you look at this example here, we can see that we're starting with $5,000 worth of cash in our bank. We're putting in about $500 per month of cash inflow, and that leaves us with 5,500 at the end of month one and over $11,000 at the end of December here in. The idea here is that now, if this was your business, you could tell me exactly how much money you were going to have in the bank in October of 2024, for example. What's nice about that is now you know that if you need to go out and you need to spend $3,000 on a piece of equipment that's going to improve your operations, well, you have the money to do that. It's not going to stress you out later on, and you're going to be totally fine because you're gonna have more than enough cash the bank account to manage that expense. The overall goal here is exactly what I just said. It's to understand what your cash balance will look like at different times. We use this as a tool for scenario planning. So, for instance, in my business that I started after University, we would convert wine and whiskey barrels into furniture and home to core products. And the challenge was, I was buying wine and whiskey barrels by the truck load. That meant that I could spend 20 to $30,000 in a single day on a truck load of barrels. I also had about a $16,000 pay roll for my team to manufacture those barrels into finished product and ship them out to customers and sell that product. On top of that, I also had rent that was coming in at about $6,000 per month. So there could be times where within the same week, I could have a $25,000 barrel purchase, a huge payroll bill, and a $6,000 rent payment all coming out within the same week. And if I didn't have enough cash in the bank account to manage all of those purchases, Well, unfortunately, somebody wasn't going to get paid, and you never want to have a scenario like that, and so using my cash flow statement, I was able to forecast and project around those large purchases to make sure that I always had cash in the bank, especially when those large transactions started to line up very close to each other. So in summary here, tracking the cash coming into the business from revenue and going out of the business and expenses is what we are trying to do. And by doing that, it allows you to get insight into where your bank account is going to be in the future. And when you have that insight, you can make better decisions. You can scenario plan, and you can improve your business because you have confidence in the future. That is the goal here. That's what I'm trying to help you with, and I hope this structure made sense. If it doesn't make sense, just leave a message down below and I will try and clear everything up. Thank you so much, and I'll see you in the next. 4. Build our cash flow statement: Alright, everybody, welcome back to another video. This one is going to be very exciting because we're actually going to start to build our cash flow spreadsheet in this video. And I'm going to walk you through everything you need to know. Let's go. To get us started here, this is what the template is going to look like. You can find this template in the resources section of the course. It's going to be there. It's easy to download it. You should be able to find it in Excel or on Google Sheets. I should have two options for you there, so you should be able to open it on any platform. What I will say upfront is that you will need to slightly tweak or adjust this template to match your business and your expenses or your revenue. So this is not a static template that you have to follow line by line. It is something that I want you to adjust and mold so that it best suits your business. Now, let's dive into it. Here is the actual template, and I've already filled in month one here, but I just want to walk you through how this works. So starting cash balance, $5,000. This is going to be for my pistachio ice cream imaginary business, and then I'll show you my real cash flow spreadsheet. It's a little bit more complicated. Here's a little sneak peek, but let's just walk through this template first. Now, first thing here, starting cash balance. This is going to be just the amount of money that is in your bank account right now, obviously, start with whatever month you're in, but this is just going to be your starting balance. I want you to pull a real number for this one. But everything else on this spreadsheet, for this example, I want you to forecast. And if you can do this, while you're watching this video, if you can download the spreadsheet and do this while you're watching the video, it'll be very, very helpful, otherwise, do this right after this video, and then we're going to build on it from there. So, starting cash balance, in this example, we have $5,000. Now, I run an ice cream company, and we make $1,500 in sales online. We do $5,000 in our store, and we do $1,200 from fairs and Festivals and trade shows. So for total revenue in the month of January, we brought in $7,700. Now, the cost of goods sold for that $7,700 worked out to $500 in materials hundred dollar in labor, 1,500 in overhead and $100 in fees for a total cost of goods sold of $3,100. And so on my $7,700 in sales, that product cost me $3,100, and it left me with $4,600 leftover to cover the rest of my business expenses. Those business expenses included labor, rent, utilities, insurance, software, legal, accounting, Wi Fi, marketing, research and development, equipment, whatever it might be, here's where you put all of your other expenses. If you need to add line items in here, you just right click and you go insert one row above and then put in equipment, and you're good to go. Now you've got an equipment line item in here. So again, adapt and mold this to fit your business. But this is where you put all of the expenses that are not directly associated with the manufacturing of that product. And then at the end of it, you have your total operating expenses, and when you deduct that from your gross profit, it leaves you with your cash inflow or outflow. This is the total amount of money that you either added to or subtracted from your bank account. And at the bottom here, if you made money, we obviously add it to your bank account so that we can see how much money is going to be in that bank account at the end of the month. That is the goal here and If we have $5,000 at the beginning of the month, we hit our revenue targets and all of our costs are accurate, and all of our expenses are also accurate. That means that at the end of the month, we'll have $66,500 or $6,650 in the bank account. Now, once you've done month one here, Basically what you want to do is you want to take this entire rote. Well, actually, so at the end of month one, your ending bank balance is 6,650, and that means that at the beginning of Month two, your beginning balance is also 6,650. Now, once you have that, we are basically just going to copy this over. Just like that, and then we're going to make sure, well, this needs to be linked here, sorry, equals that. And then we're just going to copy this over across the entire spreadsheet, just like that. And now you have a forecast for the entire year. And that will tell you exactly how much money you're going to have in your bank account at the end of the year. Now, one thing that you do need to do is adjust for seasonality. So for instance, if we're selling an ice cream company, we're probably going to do very well in the summer, and we might do $2,500 for the three or four months in the summer. And then during the winter, we might only do $100 instead of $1,500 online. So what you need to do is you need to go line by line, and you need to adjust your forecast based on what you know about your business. Ideally, you adjust the forecast based on previous data that you have about your business, but more than likely, you don't have any of that data. And so you need to put together your best guess or your best forecast based on what you know about the industry, what you know about yourself, and what you know about your business. If you are not sure and you're lost on this, and you don't know what numbers to put on here, figure out what you did in month one and just try and do maybe 5% or 10% better than that each and every month until you get to the point where that level of growth becomes a little bit too high. Now, when you're first getting started here, it's not going to matter a whole lot about how accurate you are five and six months from now. All you're trying to do is just put a number in there so that we can go through this exercise because what's going to happen here is that as soon as you're done your first month, We're going to add a column just to the right of it, and you're going to put in your actual numbers here, and then you're going to compare them and see where you were higher, where you were lower, and you're going to use that data to readjust all of your forecasts and make them better in the future. And so it doesn't matter what the number is ten or 12 months from now because it is going to change, and it's going to get updated as we get more and more data. That's the entire idea here. As we're just getting started, all I want you to do is put in your best guess with regards to what your revenue is going to be, what your cost of goods are going to be, and what your expenses are going to be so that you can get a template here, and basically a model that we can start to scenario plan around, we can start to analyze and we can start to improve over time. So that's the goal here. That's the idea. All you're going to do is make sure that you have an accurate starting cash balance. You're going to make sure that your cash inflow or outflow. Adds to your ending bank balance. You're going to make sure that your ending bank balance from January is the starting balance for February. You're going to go through here, make sure these numbers look correct. Then you're just going to basically highlight and copy the information all the way over through the rest of the spreadsheet, just like I did, just like this. Oh, you're gonna click this blue button. You're just going to transfer all of that information over. You're going to update your spreadsheet and then adjust for seasonality. That's what we're trying to do here. And by the end of it, you should have a spreadsheet that looks roughly like this where you have a little bit of seasonality based on your business, or maybe you run a business with absolutely zero seasonality, so you don't really have to adjust it. Maybe you're on a subscription basis, so your revenue is actually just based on number of users and maybe your churn rate. In that case, you need to kind of adjust your revenue to the point that you should be consistently building, and then maybe you lose one, two, 3% of your customers per month, something along those lines. And so need to adjust this spreadsheet based on your business, but it should give you a starting cash balance for every month, an ending cash balance for every month, and it should represent what is happening within your business during that month with regards to the cash going into your company or coming out of it. So once you have this template ready to go, we are going to start to analyze this. We're going to build on this. We're going to scenario plan on this, and we're going to use this to improve your business. So let's jump. 5. Analyzing our cash flow: Alright, everybody. So now that you have a template of your cash flow spreadsheet filled out, what we want to start doing is building this so that we can compare what we forecasted in our projections here. And I know it's early days. Our projections aren't great. We just started the business, and so you're kind of pulling numbers out of thin. Air, that is totally okay. What we're going to do here is we're going to add actual column here so that we can compare what our forecast was to what we actually did as a business, then we can use that data to better forecast into the future. So let me show you how this works. Okay, so here is our spreadsheet, and as you can see, we've got our month of January rate here, where we started with $5,000. We projected to do $7,700 in revenue. We projected $3,100 in cost of goods sold. That left us with $4,600 in gross profit leftover as a business of which we spent $2,950 on expenses. Then that left us with $1,650 of cash inflow into the business that we added to our bank account, leaving us with $6,650 at the end of the month. Then in February, I should say, we started with that same amount. We did another 7,700, and it goes on and on and on. Now, what's interesting here, and what's very exciting about this is that we have got a 12 month forecast here. And what I want to do is we're going to click on the column or the yeah, the column at the top here. We're going to right click, and we're going to insert one column to the left here. And it's basically we're going to move everything over, and then we're going to go January actuals. And what I like to do here is I'm going to just correct this a little bit. We'll open this up a little bit, and then what I like to do is I actually color the entire column in blue. And so now we've got January actuals. We did start with $5,000. That was a real number here. But what we can do is we can go through and we can actually fill out what our company actually did. So at the end of the month, on the first of the next month, or the first business day of whatever the next month is, you need to go through this. You need to manually fill this out with whatever your numbers actually are. So, let's say that we did 14 35 in revenue. We did 5,500 in store sales, and we did $1,350 at Festivals. Our total revenue here, and all you have to do is just kind of drag this over now. Our total revenue here was $8,285. So we actually beat our forecast, which is really nice to see. That's always a good sign when you bring in more revenue than you had forecasted. Now, with regards to our materials, because we sold a little bit more, we actually had $600 in materials. We only had the same amount of labor because the guys just worked really fast and they got everything done. Overhead didn't really change a whole lot here, and our fees, they actually stayed the same as well. And so our total cost of goods here, when we moved this over, was only $100 more expensive, leaving us with a gross profit of $5,085. Now, all of our operating expenses, just for this example and speed here, we will say that all of the operating expenses were the exact same. They probably weren't the exact same in your business. You probably have to make some small adjustments, but they shouldn't be changing too drastically. That will leave us with a total operating expenses here of the exact same number. It should be 2,950, and a cash inflow that should be slightly higher coming in at 2,135, and that gives us an ending bank balance of 7,135. And so here is our actuals column. We'll just highlight this again in blue. And now we can see that we are forecasting to finish with 6,650. We actually finished with 7,135. And when I analyze this, if these were my actual numbers as a business, here's what I would think. I would think, Okay, our revenue target for income source number one online revenue, very, very accurate. We were only off by $65. That's pretty good. Income source number two. We are off by $500, but it's a much larger number. So we're not off by a whole lot, but maybe moving forward, I think we can continue to do 550 $500. And so I'm actually going to use that number, and I'm going to update my forecast for the rest of the year. Income source number three, we actually did $150 more, but I think we got lucky because we had an extra trade show this month. And so in this scenario, I'm not going to adjust that number. And so now what we're doing is we're using our actual data here to better adjust and infer our forecast from the months ahead. And what we're going to do is we're going to gather this data every single month, and we're going to compare what we actually did versus what we forecasted. We're going to try and analyze that to adjust our forecast into the future so that our numbers become more accurate. Now, just to show you how I use this in real life, This is my actual spreadsheet. This is my real business and some of the real numbers. And so I sell a lot of product on amazon.com. I get paid twice a month, and this is all in US dollars. So I get paid amazon.com, and then my amazon.ca payments are much smaller, but they also get paid out in US dollars. And so in January of 2024, I was forecasting $16,200 in revenue coming in. We actually ended up with 19,723. My employee cost me $4,000 per month, what I forecasted. In reality, he only earned 3,040 that month. My filament cost was very high this month, though, because we printed a lot of product, and it came in at over $12,000. Now, with you line, that's my supplier for boxes. I paid a lot in boxes because we shipped out a lot of product. As you can see, I was up by about 50% on my forecast here for shipping in January. And because of that, I actually adjusted the numbers moving forward, and I continued to do that to this day moving forward. Now, my total cost of goods sold in the month of January was forecasted at 11. It actually came in at $19,000 because mostly of that filament cost, and then my design and research and development, I wasn't paying any rent back then, electricity, insurance, Amazon monthly fees. I didn't have too many operating expenses that gave my total operating expenses at just under $1,500. And a net profit of under $2,000 or a $2,000 loss. Now, this spreadsheet does not have my beginning bank balance and my ending bank balance because I'm actually running two or three different businesses through the same bank account, or I run a media business as well. So everything that you see from me on social media, it also goes to the same bank account. And so the beginning and ending bank balance for me isn't necessarily as important as what my company is actually generating for cash inflow or outflow at the end of every single month. And just another reason is because I keep a very, very large cash balance. So at this point in my business career, I am almost never worried about running out of cash, because if it ever got anywhere close to that point, I would have a lot of heads up and there'd be a lot of changes being made long before that point. But for most people, when you're just starting your business and the amount of cash you have is a huge concern, That's when we're going to use this spreadsheet right here that shows us our starting cash balance and our ending cash balance. Now, in the month of January, you can see that I was projecting to make about $4,600, but we actually ended up losing $2,000. That's because a lot of my expenses or at least this filament expense was a lot higher than I was expecting it to be. However, I was able to adjust for that, and you can see that over the next few months, I was able to bring that filament expense down. I was also able to find a new supplier. And now we are far below that expense in January. And as you can see, in the month of February, we generated $11,000 in profit and then 2200018000210002500016000 in July. So the company is generating some really nice cash flow, and I already have a large balance in the bank. So I'm not worried about my bank balance. Me personally and my business, I am more concerned about the monthly cash inflow and outflow. And like I said at the beginning, you need to adjust this spreadsheet to meet your needs as a business owner. If you're in the same situation as me, congratulations, maybe it doesn't matter as much. If you're just getting started out and cash is a super precious resource for your business, then that is something that you really need to focus on. And so, again, adjust and tweak, everything that I am giving you to match and mold to your business, your needs, and your situation. Then as a final note, just as what you need to do for a routine here is you need to go in at the end of every single month, and you need to kind of update this spreadsheet and say, Okay, here's what I forecasted for the month, here's what I actually did. Then you need to analyze that data and say, where was I high? Where was I low? Why was there a significant discrepancy there if there was any? And do I need to update my forecast for this row for the next six to 12 months? Is there a new piece of data that I need to factor into my forecast that could change my revenue or my expenses? Or I'm generating a lot of cash flow. Your business could be generating a lot of cash flow? Maybe there's a piece of equipment that you want to buy or something you want to invest that money into? You can start to plug it into your cash flow statement so that you can plan and forecast for it. So The whole goal here is to just give you basically a map and a directory of what your cash is going to look like throughout the year and how well your business is doing. So I hope this helps. We're going to keep building on this. We're going to keep going, and I hope to see you there. Talk to. 6. Budgeting: Alright, everybody, it is time to officially start talking about the most exciting topic of this entire course. And that is budgeting. Now, I know this is usually not everybody's favorite topic, but this is the one topic that will help keep your business organized more than anything else. And so when it comes to budgeting, you need to understand that budgets are made using your cash flow forecast. That spreadsheet that we have been working on, that spreadsheet that we have built. This is how you build your budgets for marketing, your budgets for research and development, your budgets for travel or meals or expenses, whatever it might be, your budget comes from this spreadsheet. So Here's the idea. Let's say that you need to spend money on marketing? You may need to advertise online to send customers to your business. And so in your cash flow spread sheet, you need to set a monthly budget for your basically marketing expenses. For us, let's just say, as an example, every month, we are going to spend $500 on advertisements to try and send customers to our website or to our business or to whatever it is so that they can buy our products. Now, how do we do this? Number one, you need to define the goals of the business. First of all, if your goal is to sell pistachio flavored ice cream to the people of your town, you need to have some way to reach them. You can do that through marketing. If your goal is to be B to B, you sell a business to business service that makes business owners lives easier, then you probably don't need to be advertising on the same channels as the pistachio company. And so number one, you need to define the goals of the business. Number two, you need to set the priorities in order, and number three, you need to allocate those resources. What I mean by this is if you are a business owner, you are sold out of your three best selling products right now, and production can't keep up and you can't make them fast enough, you should not be devoting any resources to marketing. You should be devoting all of your resources, time, energy, and people to increasing production. You need to look at your business and figure out where the bottleneck is, and then you need to devote resources from your cash flow spreadsheet to try and eliminate those bottlenecks, whether it's marketing and sales, whether it's manufacturing, whether it's your equipment, or your labor, whatever it might be, your job is to play chess with the resources within your cash flow spreadsheet so that you can generate the most profit over the long term. And so if marketing is not a priority because you're sold out of your three best selling products, then you need to take that $500 a month and put it into production or to manufacturing or to getting more efficient equipment, whatever it might be. And so this is how you need to kind of think about your budgets and how you manage your resources. When it comes to an actual example here, I have put a marketing tab on the bottom right here, it's basically just another sheet here in the Excel template. And to give you an example of what this could look like, let's say that you give your marketing employee or department a $500 budget per month to spend on online advertisements. They can break it down by these four different categories. They can measure their total spend, and then look at their remaining budget at the end of that month. This $500 this needs to be in your cash flow template rate here under marketing for $500. So, as you can see, it's in here already. We're good to go. Now your marketing department knows that they have $500 set aside for them in the month of January. They can use it however they want, but they cannot go over $500, or if you have some specific requirements for how they must spend it, you can communicate that to your team. But what happens here is you, as the business owner, you go through your cash flow forecast, and you say, Okay, here's what my business looks like. Here are the resources that I have planned to allocate to these departments and these expenses. Does this make sense? Or should I reduce the marketing budget and increase the equipment budget? Should I increase the legal department because I'm worried somebody's about to sue me? Do I need to set aside some money because I think somebody one of my suppliers is about to go bankrupt? Whatever it might be? You need to look at your business and basically play chess with the resources that you have. And then what you do there is you adjust those budgets for your different departments on a monthly basis. And so let's say we're sold out a product right now, I'm going to scrap my marketing budget in February, and I'm going to scrap it in March, and I'm going to put all of that money into buying new equipment. And so we are going to spend $1,300 in March on a new piece of equipment that is going to speed up our production. That's the idea here, and that's how you need to think about your business. Your job as the business owner is to be Judge, the Dragon, sitting in the den, the shark in the tank, whatever it is. Your job is to be that outside perspective looking down at your business and saying, How can I make this better? How can I improve this? How can I make it more efficient? And then you need to come in, and you need to move the pieces around to make that business as efficient as possible. That is your job as the entrepreneur, the founder and the CEO that is running this business. Now, just in summary here, budgets are a tool that you use to give the different areas and departments of your business a limit on how much they can spend. They're also something that you use by adding or subtracting to that budget so that you can control the different pieces and the resources within your business so that you can optimize for the results. Your job as the business owner and the founder is to continually adjust those budgets as your business grows or as your business levels off or as your business changes so that those budgets reflect the most efficient way to run your business. That's how you need to think about things, and I hope this video helped, we'll see you in the next one. 7. Principle and strategies: All right, everybody, welcome back to another video. In this one, we're going to break down a couple of different principles that you should be applying to how you think about your cash flow statement. Then I'm also going to give you a couple of strategies that you can use to improve your overall results and make some adjustments if you ever get to a pinch, let's jump right in. Okay, so to start us off here with the principles, I know this sounds kind of obvious, but the larger the cash position that you can keep for emergencies and downturns, the better and the safer your company will be. If something like COVID happens again and your business gets forced to shut down or close or adjust, You have a large cash reserve, number one, it's going to be way less stressful for you. Number two, you're going to be able to manage your business much much better. And number three, you're going to be able to stay alive when a lot of your competitors will not be able to. Having cash in the bank is not a terrible thing, even if you're losing money to inflation. It can be a safety net that keeps your business alive in the event of a downturn or an emergency. Number two here, try to accelerate your collections. Shorter payment terms for your customers is better. What I mean by this is that if you can collect money before somebody even receives the product, that is best case scenario. If you can collect money when they receive the product, that is second best case scenario. But if you have to wait 15 or 30 days or 45 days for your customer to pay you, that is a problem, and you need to try and do as much as you can to shorten that time period because it's going to significantly help your cash flow situation over Number three here, reviewing and adjusting your cash flow forecast should be done on a monthly basis, and honestly, you should be reviewing it on a biweekly basis in case anything change. Your goal is to increase revenue or decrease costs. That is the overarching goal of the business and how you're going to generate more profit, but you need to make sure that you're going through the routine every single month of updating your actual and your forecast so that you can get the data that you need to not only improve that cash flow forecast, but improve your decision making as the business owner. Principle number four here, you need to completely separate your personal and your business expenses. Keeping your personal life completely separate from your business life is not only a legal obligation, but it is going to make everything much, much simpler, especially if you ever bring on business partners. Nobody wants to see that their business partner is expensing all of these lavish dinners or expensing their vehicle or expensing their cell phone if they're not able to do it as well. And if you are able to do it as well, I'm telling you right now that you need to follow the rules of whatever country you live in you need to make sure that you're paying the appropriate tax, and if they catch you expensing something that is not business related, they're going to charge you for it. It is going to be a nightmare. You're going to raise red flags, and they are going to go through every business document that you have and looking for other problems. And so keeping your business and your personal finances completely separate is the best thing that you can do. If you need to pay for your cell phone or a vehicle or whatever it is, and it is related to your business, yourself an allowance. Do not pay for it directly through the business, give yourself $500 a month as a vehicle allowance or $100 a month as a cell phone allowance and build it as a business policy. Do not expense it directly because it will just eliminate all of the red flags and it'll help you keep everything separate. Principle number five, take advantage of payment terms when available. This is kind of the opposite of number two here. Basically, as a business owner, you want to collect cash as much as possible, and you want to pay your suppliers as late as possible. The idea here is that you eliminate any of these timing issues. For instance, Let's say that you got two large orders right away, but they weren't going to pay you for 60 days. That means that you need to go out and buy all of the inventory to manufacture that product. You need to pay for all of the labor. You need to pay for all of the overhead. You need to pay for all of the expenses to ship it out, and then it needs to sit in their warehouse or on their shelves, and they're not going to pay you for 45 days. And now, all of a sudden, you've laid out all of this money up front, and you're not getting paid until way later. If you can shorten that time period, it's going to help your cash flow and eliminate any of those cash pinches. If you can pay your suppliers later on, it's going to do the exact same thing. It's going to allow you to keep more of your money in your account, and it's going to allow you to invest it into your business and hopefully grow at a faster rate. That's the entire idea here. Now, when it comes to strategy number one, these are just things that you can do to help improve the cash flow of your business. They are not all necessary. They are not all things that you need to do, and if you're in a position where you don't need to take advantage of something like factoring, then it's probably a good situation. But the idea here with factoring, that you're going to sell your invoice to a third party at a discount for cash upfront. So let's say that Walmart comes to you and they say, Hey, I want to buy $100,000 worth of your product, but you don't have the money to afford all of that inventory and overhead and upfront labor. Well, what you can do is you can sell your invoice to Walmart To a third party, and they will buy that invoice from you, but instead of paying you $100,000, they're only going to pay you $96,000, and they're going to go collect $100,000 from Walmart, and they're going to make that $4,000 difference here. That's their business model, but the advantage for you is that you get $96,000 up front to go and manufacture all of that product and get it out the door and basically not being a concern or a pinch or be stressed out about your cash flow. And so if you're ever in a position where you have a large order, somebody's willing to pay for your product, but they're not going to pay you for 45 or 30 days or whatever it might be, and you need the money up front, go through a process called Factory. There's lots of companies that will do this for you. There's probably one in your area. All you need to do is a quick Google search, and they will help you figure out what is going to be the best situation for you. Okay, strategy number two here, and this is actually one that I just started trying out recently. It's a company called Plastic Pay, and they allow you to pay by credit card even when it is not accepted. So if a supplier will not accept you paying by credit card, this service allows you to pay by credit card. And you get to keep number one, the points on that transaction. But you also, what's really nice about this is you get the 30 days payment terms that you get from your credit card, because when you make a transaction on your credit card, you don't have to pay it off right away. So if you need time to pay for a transaction or you want to collect the points, you can use plastic pay to extend those payment terms. Strategy number three here, ask your supplier for a discount for early payment. If you have to pay a supplier for materials that go into your product, whatever it is, ask them for a discount on early payment. Usually, you can get two or 3% discount if you pay for the product as soon as it ships or if you pay for it upfront, and over time, that can really, really add up, especially if you're ordering on a regular basis, you now have that extra two or 3% that you would have spent on cost of goods sold that is now going directly to your bottom line as profit. Now, strategy number four here, if you're ever in a pinch is that you may be able to get a cash advance from your merchant processor. If you run an online store and it's on shop of Shopify will be able to give you a loan based on the revenue that your company is bringing in, and in return, they will take a percentage of every transaction that goes through your website in the future. So if you are doing a lot of sales online, especially through one specific merchant processor, they may be able to give you financing depending on the traction and the revenue that your company is bringing in. I've seen a lot of people do this, and they've had a lot of success with it. However, it is super convenient, but the interest rate is slightly higher. The last one here is to negotiate a payment plan, you would be surprised how often a supplier, a vendor, or a company is willing to put together a payment plan with you, especially if they have any type of concern that you might not be able to pay. And so, for instance, every single company would rather get money from you over the next couple of months than not get paid at all, and so if you're ever in a position where cash is tight, be honest, tell that supplier, say, Hey, Things are really tight right now. I'm struggling. I need some help here. I need some time. I need you to help me out. I'm not going to be able to pay you this month, but I can pay a third of it each month over the next three months. I guarantee you 99% of people are going to say yes to that deal, if they are concerned at all about you going under or your business not making it, whether it's true or not. It just depends on how you kind of have that conversation. And so make sure that if you are going to have those conversations, make sure it's necessary, make sure you actually need it, but you would be surprised how flexible people can be when they're concerned about not getting paid at all. Now, strategy number six year, if you have a good relationship with your bank, I highly recommend signing up for a line of credit, whether you need it or not. Most banks will give you $10,000 as a line of credit, and it will cost you absolutely nothing if you never use it. However, if you need to use it, it is way better to have it than to need to go get it and try and get the bank to approve you when you actually need the money, because it is not going to happen. Because when you need the money, you're desperate for it, you probably don't have a ton of money, and you don't know what to do, and so they can sense However, when you're like, Hey, I've got lots of cash in the bank, business is going really well, can I get a $10,000 line of credit, just as a backup case for the future? They love those scenarios. They want to give it to you. It's like this is a no brainer for them. And so if you are in a good financial position and you know that your business is kind of cyclical or that you need to buy large batches of inventory like I did for my wine barrel business, try and go to your bank and get a line of credit set up? It's not going to cost you anything unless you use it. So I highly recommend it because it can be a lifesaver in the event of an emergency or the event of a downturn. Now, in summary here, That was a lot, and I'm like, huffing right now, but keep a cash reserve. No matter what happens, keep cash in the bank account and prepare for a downturn. In case something crazy happens, make sure that you're not over leveraged and that you've got cash that's going to keep your business running, no matter what. Second, stay up to date and review it monthly. You need to review your cash flow statement every single month. You need to update it and think about these strategies and whether or not they apply to your situation. Like I said, keep your personal and business finances completely separate. I can't say that enough. It is super super important to keep everything as clean and separate as you possibly can. And then, like I said, again, accelerate your collections, meaning, bring in your collections as soon as you can. You want to collect that money as soon as possible. And ideally, you want to pay out your suppliers and your vendors as late as possible without straining those relationships. That is the goal because it allows you to keep more money in your business that you can invest into the business to grow that business. That's the idea there, and that's the reasoning. And I hope this helps. If you have any questions, leave a comment down below, and we'll see you in the next. 8. Conclusion : All right, everybody, welcome to the last video in this course. I sincerely appreciate you sticking with me all the way. Now, just to recap what we learned in this course, I gave you a template for building your cash flow spreadsheet, and I explained why this is such a powerful tool. And it's because it basically builds a model of your business that you can use to forecast as well as kind of experiment with and scenario plan with in the case that you want to expand your business or buy a piece of equipment or go through a large purchase, whatever it might be, this is a tool that you can use to figure out where your cash position is going to be at three, six, hopefully, 12 months in advance. Now, I will tell you that this is a monthly task at minimum. You need to be going through this and updating this spreadsheet at the end of every single month at an absolute minimum, and your forecasting should get better with time and data. Remember, you were going to be comparing your forecast to your actual numbers and then analyzing those numbers to figure out why they are different. Then you need to update forecast based on that information and what you are finding in that process. You also need to remember some of the principles and strategies that I taught you from managing your business money and managing your cash flow. You want to extend your payments. You want to shorten your receivables. You want to make sure that you are collecting your cash on time and that you always have a cash buffer. Now, if there's anything that I didn't cover in this course, or if there's anything that you absolutely loved about this, please consider leaving a review. Read every single comment, I read every single review, and I try to improve this course over time based on the feedback that you guys provide. And so if you can tell me what you liked or what you didn't like or what was missing or what you thought of the course in general, I would sincerely, sincerely appreciate it. And I use that feedback to try and improve it for the next people going through the course. Now, remember, I did put together a class project, and I can understand that you may not want to submit your own business cash flow for kind of protective purposes. But what I would ask is that you please share your website or your social media handle or something related to your company so that we can look you up and we can follow, we can subscribe, we can like, we can comment, and we can support you and possibly even buy your product. I'm trying to build a community of students that have gone through the course that are going through the course, and that will go through it in the future so that we can come together and we can support each other, and we can offer our own encouragement and hopefully learn from each other as well. Now, if you are interested in continuing with this education, please consider checking out the next course. It is all about marketing for growth. And I'm going to walk you through how to scale your business up. I'm going to walk you through the differences between marketing branding and sales. We're going to talk about all the different marketing channels that you can use. We're going to discuss paid vers organic marketing and a couple of strategies behind both. Also going to go through AB testing, which is one of the most powerful tools in the entire world of business. I'm going to show you what key metrics to use to evaluate your marketing efforts. I'm going to show you the tools I use to make my resources, my time, my energy, and my money, go as far as possible, and I'm also going to walk you through how to build an e mail list that makes you money. So definitely check that Consider following me on social media. I post most of my videos on YouTube and TikTok, but I'm also active on Instagram, Twitter, X, and Linked in. I also recommend following me here on skill share. Now, if you are building a business that is doing well, and you are sure that you have found product market fit, and you've got good traction, and your cash flow is looking you need some money in order to scale up and actually build this business. Please consider reaching out to me. I am making active investments in small companies to help them grow and scale. I will write you a check that will go into the company to help you grow the business, and I will take a small percentage of equity in return. If that sounds like something you are interested in, please consider writing an e mail to info at zach artley.com, and I sincerely appreciate and look forward to hearing from you. Now, in summary, here's what you need to do. Number one, conservatively, manage your cash flow and build a cash flow model that you can use to help you build a successful business. This is a tool in your tool belt as an entrepreneur that you use for planning and decision making and forecasting and scenario planning, and even financing. This is going to be a massively powerful tool in the event that you ever need to go to the bank and get a loan or a line of credit or any type of debt. And so I hope this video helped. I hope this series helped. This is a tremendously powerful tool that I use in my business almost every single day, and I hope that it helps you with your business. If you want to see more from me, check out my other courses, and I hope to hear from you soon. Talk to you later, and good luck with your business.