A Lawn Care Business Cash Flow Chart How it works
Grasping at straws trying to oversee and forecast your cash flow for your lawn care venture? I totally get it – it’s a bit like trying to catch a butterfly with tweezers. With the startling statistic that over 70% of small businesses find themselves in a monetary pickle at some point, it’s no surprise that this topic is higher on the agenda than an ant hill in your favorite lawn.
This article aims to guide you in crafting an effective cash flow chart – akin to creating a beautiful landscape design but for numbers. The goal? Easing those financial worries and paving the way towards more fiscal predictability.
So, ready for some crystal-clear financial insights? Let’s roll up our sleeves and dig deep into the dirt!
- Cash flow is essential for the financial health of a lawn care business, and creating a cash flow chart can help track and manage finances effectively.
- Understanding cash inflow (money coming into the business) and cash outflow (money leaving the business) is crucial for managing a lawn care business’s finances.
- Utilizing accounting software can simplify financial management by tracking income and expenses, generating invoices and statements, and monitoring cash flow in real time.
Understanding Cash Flow for Lawn Care Businesses
The lifeblood of your lawn care business is cash flow. If you haven’t got any cash to fill the fuel tank then having a thousand dollars owing to you from your clients is not going to help much. There are lumps and bumps when it comes to running a business and having a cash flow chart is going to help you figure out when you will have available funds and when you might need to use your overdraft.
Being able to look at your cash flow chart is going to let you know about those famous and feast times before they suddenly turn up on your doorstep.
Importance of A Cash Flow Forecast
Knowing the ebbs and flows of your business can help you figure out when to commit to equipment purchases and when to tighten your belt. A positive cash flow is a sign of a healthy business while a negative cash flow could be a sign of trouble.
If you want your lawn & landscape business to succeed then you’ll need good financial management and the first step is creating a cash flow statement.
So how do you go about setting up a chart that will help you get effective financial control and succeed with your business? Don’t worry I will walk you through a complete guide on how to do that in this article.
Step 1 – Work Out Income Vs Outflow
- Cash Income: This is all the money that comes into your lawn business. This would include all the income you earn mowing lawns and one-off jobs. Even doing something outside the scope of your business such as selling leads for use is still considered income.
- Cash Outflow: All the money going out of your business. This includes everything such as drawings, salary, fuel, equipment, marketing, loans etc (you get the picture)if it comes out of your account it is an outflow.
Step 2 – Creating a Cash Flow Forecast
Now that you have your income and expenditure in front of you (bank statements are good for this) we are ready to go.
- Start with an Excel template: Excel has business plan templates with built-in formulas but if you want something more suited to a lawn maintenance business then I have a template that I have written for you
- Work out where you are going to start. I would start at zero but you could start at the balance from the previous bank statement or your current bank balance.
- Fill in your projected income: This should be all of the money you expect to earn from your lawn mowing and landscaping services. To work out your one-off work revenue projections, take your hourly rate and have a guess at the amount of work you will pick up every month. This does not have to be perfect just go with the figures that sound right. Do NOT exaggerate, you will only hurt your business.
- Fill in your expenditure: If you are new this could include your startup costs. Then there are things like your marketing budget, equipment purchases and running costs. To keep things easy, if it’s on your bank statement and it is not a one-off cost then it should be on your cashflow.
- Develop financial projections: Fill in the income and expenditure and see how your balance looks at the end of every month.
- Now play with it; Change the figures and see how it changes, consider ‘what if’ questions. This will give you ideas of how your business will deal with an emergency or an unexpected change which could affect your profitability.
You are probably wondering how I know these things being a humble lawn care operator. It’s because I am always doing courses and reading books. In fact, I have listened to hundreds of audiobooks while I have been mowing lawns.
Using Accounting Software
Keeping track of everything using accounting software is always a good idea. If you are thinking about going down that road then I would recommend Zoho Books. They have a full-service suite that includes everything from a payment portal to generating financial statements and best of all it’s free if you turn over less than 50K per annum. Their paid plan is about half the cost of competitors too.
Although this is going to help you run your business and keep track of everything, If your business is new or if you have just started using it, it will not help a great deal with cash flow projections in those early days.
Accounting software becomes better at prediction as time goes on and it starts getting more information to work with.
In this article, we are going to do this with a spreadsheet as it gives the best results in the early days and I would assume if you had a well-used software package on your PC, then you wouldn’t be reading this in the first place.
How does the spreadsheet work?
What the spreadsheet will do when filled out with accurate information is give you a visual representation and forecast of how your bank balance will look over time. This is a simplified example below.
|Month||Opening Balance||Cash Inflow||Cash Outflow||Balance|
The income and expenses have both been totaled in this example and the balance is what you have left at the end of the month. If it is a negative then you will require more funds that month or an overdraft available.
Tips for Improving Cash Flow
The great news is that your cash flow is not set in stone. You can change it. We do it all the time. In fact, for my lawnmowing101 business, I open the cash flow and update it every morning. It takes me less than a few minutes. Normal people would do this weekly or monthly but hey, I love playing with spreadsheets. :-)
Here’s a video with some tips and tricks on improving cash flow.
Crunching the Numbers
I love crunching numbers when it comes to my lawn business. By carefully analyzing the financial data, I can gain valuable insights into what’s coming in and what’s going out.
Then you get to play. One of my favourite things to do is to run ‘What If” scenarios.
‘What If’ Scenarios
I often consider different ‘what if’ scenarios to help me better understand and plan for the future of my lawn care business. Here are some important scenarios to consider:
- What if there is a sudden increase in competition in the local market?
- What if there is a significant change in the cost of materials or equipment?
- What if there is a sudden surge in demand during peak season?
- What if there is an unexpected decrease in demand due to external factors?
- What if there are unexpected weather conditions that impact our ability to work?
In conclusion, one of the most important things you can do for your lawn business is to run a cash flow spreadsheet.
It will help you make informed financial decisions when operating your business, especially for smaller businesses. If you know when your bank balance is going to be low, you can plan ahead and change things.
You can’t do that unless you know what’s coming and that is exactly what a cash flow chart does.
If you enjoyed this article, consider joining the lawnmowing101 membership. You will find plenty of training courses there and a step-by-step system to increase the profits of your lawn care business.
1. What is the first step in creating a cash flow?
The first step involves setting up your “chart of accounts” to determine and organize all incoming and outgoing transactions.
2. How can I create a budget template for my lawn care business?
You can use financial modelling to develop a 5-year financial projections plan and create an editable budget template that includes an income statement, P&L, and cash flow details.
3. Where do loan repayments fit into my cash flow chart?
Loan repayments are featured places in your cash flow chart as monthly costs under the “operating” category, which also includes other recurrent expenditures you’ll likely incur.
4. How will this financial plan help me break even with my lawn care business?
A comprehensive financial plan helps you understand your per-hour expenses versus revenue; thus assisting you to hit the break-even point faster by giving insight into what areas you can’t afford overspending.
5. What if I need assistance while writing this cashflow chart?
If you find things complicated or get stuck at any stage, don’t worry! You always have options like reaching out for SBA guidance or hiring professional assistance without costing more than a few hundred dollars generally.
6. Does every business using such models provide stakeholders with detailed breakdowns of their finances?
Yes, providing stakeholders with detailed breakdowns through income statements illustrating P&L and Cash Flow etc., helps them grasp accurate valuation of the business.
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