Why use a cash flow canvas?

Using a canvas is a good way to understand cash flow. It helps you draw a picture of your cash flow to check if it’s healthy and see how money moves in and out of your business.

You can use a canvas to:

  • look back at what happened in your business
  • look forward and explore changes
  • set targets and track your progress.

A canvas doesn’t replace your financial reports such as your cash flow statement.

Create your cash flow canvas

Download our template to create your cash flow canvas.

Complete your cash flow canvas

Keep it simple! Focus on answering 4 questions about cash flow health.

If you copy numbers over from your financial reports, make sure your reports use cash accounting. That’s how the canvas is designed. Learn the difference between cash and accrual accounting.

Add your numbers

  • Cash you have at the start of the period.
  • Cash in (all the money you receive from sales) and cash out (all the money you pay out for expenses). For cash in and out, group amounts together rather than listing each item. Say whether the amounts include goods and services tax (GST).
  • Super and tax on pay (PAYG withholding) you must hold for people if you employ them.
  • Estimated percentage of income tax you owe. Learn about Income tax for business.
  • Cash you withdraw from your business to spend on yourself.
  • Net assets for 2 periods. Include your business assets only, not personal assets such as your house. Include your liabilities too (cash you owe on loans and cash you owe to others).

1. Are you trading profitably?

Profit is measured in different ways and isn’t the same as cash flow.

When it comes to cash flow, a cash surplus can indicate you're trading profitably.

The canvas shows your cash surplus or deficit. The money you receive minus the money you pay out, minus any goods and services tax (GST), is your cash surplus (if more than zero) or deficit (if zero or less).

2. Have you put enough aside to meet your financial commitments?

Some money in your bank account may be money you owe to others. For example, the goods and services tax (GST) portion of your sales.

The canvas shows your tax and super commitments. GST on sales, minus GST on expenses, plus pay as you go (PAYG) withholding, super and income tax is the total tax and super you owe. You may have other financial commitments too.

Putting the money you owe aside in another bank account helps you pay it when it's due.

3. Do you have enough to spend on yourself and pay others?

The canvas helps you see how much money you can spend.

The money you start with, plus your cash surplus (or minus your cash deficit), minus your tax and super, is what you can spend.

You could use the money you have left to buy assets, pay off loans or spend on yourself.

4. Are you getting ahead or falling behind?

Compare your net assets at different dates to see how you are going.

Your net assets are your total assets minus your liabilities.

If your net assets are increasing over time, you’re getting ahead.

Use your cash flow canvas in a cycle

Following a cycle helps you keep a close eye on your money and pick up any issues early.

Create a new canvas for each step.

See how you performed and look at where your cash goes.

Check for issues that might prevent you from achieving your goals. For example, did you set enough aside for tax?

Use your past performance as a baseline to compare to in the future.

Base your numbers on what you think is likely to happen.

Check how financial decisions you want to make might affect your cash flow. For example, what if you employ someone? Or pay yourself more?

Play with future scenarios and test out changes you could make to Improve your cash flow.

Base your numbers on the future scenario you want to achieve. Break it up into shorter periods to set targets, for example monthly.

Track your progress by comparing your targets to your actual cash flow.

Be flexible and adjust your targets as you go if they’re not quite right.

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