Cash Flow Diagram Generator

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• January 3, 2022 Updated
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Every business owner understands the importance of tracking business expenses, income, and net cash flow. But many may not realize the value of seeing those financial results in graphical form. Our Cash Flow Diagram Generator is an excellent tool for displaying business financial results both numerically and visually.

Rationale for Graphic Representation

Most business owners utilize a variety of programs and spreadsheets to forecast, calculate, and record the results of their business activities. Many of those forms are used to assemble expectations and results in cash flow forecasts and cash flow statements. But these numerically based statements may not always allow the owner to perceive insights crucial to their business.

The Cash Flow Diagram Generator not only provides numerical information on the factors used to build a traditional cash flow statement. It also represents that information in a graphical format which can help to visually identify areas of concern or for potential improvement.

Let’s take a closer look at the Cash Flow Diagram Generator.

Template Contents

The template consists of two tabs (worksheets). The first tab is entitled “Cash Flow Diagram Generator.” This is the page you will use when designing your own cash flow reports.

The second tab is “Cash Flow Diagram Example” and it is this example that we’ve used to help illustrate how the template operates.

This is how the first tab appears:

Of course, you can replace the title with one of your own. You can also use the controls in Excel to customize it for your own look. For now, we’ll use it as is.

How To Use The Cash Flow Diagram Generator

An Example

We start by filling in the “Period/Category” chart at the bottom. Here, you can use standard income/expense category identifiers, or any other identifier of your choice. You can also adjust the chart to include a larger or smaller number of Categories.

In our Example, we've assumed it to be a projection of your expected business cash flow over the subsequent 30 days. We’ve filled the form in as follows:

You’ve started with a beginning balance and recorded your expected revenues and expenses for the next thirty days. The Generator will automatically calculate the last line of the chart, the “Cash, End,” so you don’t need to fill this space in. “Cash, End” is the amount of cash you expect to have at the end of your projected timeframe.

Remember that this is just an example. You can adjust the number and names of the categories to fit your needs.

Also, note that the template will display either positive cash flow (as in the example above) or negative cash flow, as shown in the Comparison below.

Once you’ve filled the chart in, the Generator will provide a graphical representation of your entries. The example below demonstrates how the Generator will use your entries to build a visual representation of your cash flow for the intended time period.

This graph allows you to visually determine whether the relationships among the various entries are to your liking.

In the Example, we note that the increase in cash at that end of the timeframe is due primarily to the increase in “Owner’s Investment.” This line on the graph very clearly displays this entry’s importance to the resulting “Cash, End” position. This reliance on additional owner cash injections may or may not be agreeable to you, but at least you can see it’s importance during the forecasting period and its relationship with the other entries.

A Comparison

Now, let’s assume that you are fifteen days into your timeframe and want to see how your actual income and expenditures compare to your projection. Here are the theorized numbers through your first fifteen days of operation.

Some of these numbers don’t appear to be tracking as anticipated. Let’s see how they display on the larger graphic.

Some Observations

Of course, “Cash, Beginning” is the same as it was in the original projection. “Cash Revenue” does not appear to be quite as strong as we’d expected, but that may be explained by the timing of the report, the expected sales mix during the latter part of the month, or any number of other factors.

Other categories appear to be generally in-line with our expectations, except for “Purchase of Inventory.” Here, we can see that this expenditure is significantly out-of-line against not only your original projection but also in proportion to the other categories in our model.

Clearly, you need to take a further look at this expense item and determine why it is so out of character. Did you have to purchase the whole month’s inventory at one time? Did the inventory cost jump unexpectedly? Will you have to purchase more inventory for the second half of the month? The visual nature of these diagrams allow these questions to pop out at you more quickly than if you reviewed the numerical value of each line item.

Demonstrated Utility

This example demonstrates the utility of the Diagram Generator. Without your having been able to visualize the inventory purchase category, you may not have realized its effect on your cash position or its relationship to other income/expense factors. Reading the numbers is helpful, but seeing them graphically represented offers a new dimension to your understanding of the relationship of your cash to your income and expenses.

The Generator can be used in a number of ways.

Of course, the Generator can be used to project and graphically represent the business’ cash position over any timeframe (we only used thirty days in our Example).

But, it can also be used to project and gauge the impact of specific business initiatives. Say the business owner is considering expanding to an additional location. The Generator can help project and analyze the risk/benefit of such a move separately from the original location.

Or, it could point out how the business’ income and expenses relate to one another under significant growth pressure. Do employee expenses rise disproportionately to income? Such a realization might be more easily identified using the Generator.

Summary

Every business owner understands the importance of cash flow. The Cash Flow Diagram Generator is a useful tool for aiding the owner’s understanding of this critical business element.

It is easy to use, and it can be adapted to a variety of business situations. We created it to help streamline our own business, and hope you find it as helpful as we have!