Start Small Win Big: Your Week 4 Action Plan

Step 4: Understand your finances.  

A couple of months ago I spoke to a woman who owned a struggling stationery business and I asked her how much longer she thought she could survive based on how much cash she had available in her company. She looked at me like I had just landed from Mars. Then I asked her how much money she spends a month. Again, blank stare. So I asked her how much cash she brings in a month.

By now you can guess what the reaction was. This is a scary place to be. While digging into your business's financials may not be your idea of a good time, you are shooting yourself in the foot if you ignore them.

So this week's assignment is to build a 12-month cash flow statement. Wait, come back, I'm here to help. Your cash flow statement may be the most important financial statement you create because it helps you get a handle on how much cash you have on hand at any given moment.

During the recession I spoke to a lot of business owners who had to close down their businesses, not because they didn’t have customers coming in, but because they did not have enough cash available to help them weather the hard times. With a better understanding of their financial situation, they might have made it. Running out of cash should never come as a surprise. And if you stay on top of your cash flow, you can plan ahead to deal with an upcoming period when money will be tight.

You do not want to wake up one day and realize you do not have enough money in your account to pay your vendors or your employees.

So let’s get started. First, what is a cash flow statement? It’s simply a record of two things: the cash that’s coming into your business and the cash that’s going out of it. That’s it. Really.  


12-Month Cash Flow Statement on Also on Business Plans and Financial Planning Documents Editor’s note: This is the fourth of eight installments for SUCCESS’s 2nd annual Start Small Win Big entrepreneur challenge. If you’re not signed up for Start Small Win Big, it’s not too late. Visit to join.

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JJ Ramberg is an author, the founder of and the host of MSNBC's small business program, Your Business. She was the featured mentor for SUCCESS' latest Start Small Win Big entrepreneur challenge. 

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