Cash Flow Calculator

What is cash flow, and how do you calculate net cash flow?

A cash flow calculator adds up the cash a business expects to receive and pay, month by month, and carries each closing balance into the next month, so you can see when cash runs short before it happens. It works on cash basis: amounts count in the month the money moves, not when it is earned or billed.

Cash flow is the movement of cash into and out of a business over a period. Net cash flow is cash in minus cash out: net cash flow = inflows − outflows. A positive figure means the cash balance grew in that period; a negative figure means it shrank. Closing cash is opening cash plus net cash flow, and that identity is what this calculator repeats for twelve months in a row, carrying each closing balance into the next month.

Cash flow is not profit. Profit counts a sale when it is earned and a cost when it is incurred; cash flow counts them only when money moves. A sale on 60-day terms is revenue now and cash later. Repaying loan principal is cash out that never appears as an expense, and a machine bought outright takes cash on the day of purchase but reaches profit slowly, as depreciation. That is how a profitable business runs short of cash.

How does a monthly cash flow projection work?

A projection lists each expected receipt and payment against the month it will move. Every line here has an amount, a timing — monthly, quarterly, annual or one-time — and a start month. A quarterly line recurs every third month from its start month, so tax that starts in month 3 falls in months 3, 6, 9 and 12.

A one-time line, such as equipment, lands in a single month. The balance matters more than the total. The calculator finds the lowest closing balance and counts the months that close below zero, because a year can end in surplus after a month in which payroll could not be paid. With the default figures the year ends at $15,000, yet cash is −$4,000 in month 4 after $35,000 of equipment, is still −$500 in month 5 and only returns to zero in month 6.

Growth under Advanced applies one monthly rate to operating inflow lines and one to operating outflow lines, compounding from each line's start month; loans and equipment do not grow. Ten thousand a month growing 2% a month adds up to about $134,121 over the year, against $120,000 if flat. A rate that looks small each month compounds quickly, so test modest values and compare.

What are operating, investing and financing cash flows?

The US statement of cash flows (FASB ASC 230) groups cash flows into three categories. Operating activities are the cash effects of running the business: customer receipts, payments to suppliers and employees, interest and tax. Investing activities are buying and selling long-lived assets such as equipment. Financing activities are borrowing and repaying debt and transactions with owners.

Each line you enter carries one of these activities, and the result shows the net cash from each. A loan payment is split: under US GAAP the interest is operating and the principal is financing. With the default figures operating activities bring in +$44,400 over the year, the $35,000 of equipment is investing and the $1,200 a month of loan principal is −$14,400 of financing.

Operating cash flow by the indirect method starts from net income and corrects it to cash: net income + depreciation and amortisation − increase in receivables − increase in inventory + increase in payables. Depreciation is deducted in profit but spends no cash; rising receivables and inventory tie cash up; rising payables defer payment. With net income of $20,000, depreciation of $3,000, receivables up $4,000, inventory up $2,000 and payables up $1,500, operating cash flow is $18,500.

Free cash flow is operating cash flow minus capital expenditure. In the projection that is net operating cash less equipment bought: $44,400 − $35,000 = $9,400 at the defaults. In the indirect readout, with $6,000 of equipment, $18,500 − $6,000 = $12,500 remains. It is a widely used measure rather than a line defined by US GAAP, so definitions vary between companies; this calculator uses the one stated here.

What can a cash flow projection get wrong?

This is a projection of your assumptions, not a forecast. It knows nothing about your customers, seasonality, late payers or lenders. Common mistakes are entering revenue in the month of the sale when customers pay weeks later, leaving out quarterly tax, annual insurance and loan principal, forgetting that equipment lands in one month, and mixing profit figures with cash figures.

Treat the lowest balance, not the year-end figure, as the number to examine. How much cash is enough depends on your own payment dates and risk, so no target is suggested. This page is about business cash flow. It does not discount future cash flows to a present value, which is a net present value question, and it is not a household budget. It estimates from the figures you enter and does not replace your accounts, your accountant or your bank; your actual cash will differ.