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As an entrepreneur, it is essential that you have a cash flow forecast for the next 18 months. Treasury is a a tool that allows you to anticipate liquidity problems, calculate how much money you need and demonstrate your ability to pay it back. Cash-flow management is a key activity that cannot be delegated, as it helps you plan ahead, anticipate problems and avoid cash shortages, which can kill many businesses every year.

Cash flow helps you to calculate how much financing you need to start up your business and demonstrate the economic viability of your project. To do this, non-financial entrepreneurs usually use a simple tool, such as the old account, in which they write down the money that comes in and the money that goes out. We give this tool a cooler name: treasury. It is important to carry it with you every day to keep track of your financial movements.

The treasury sort your bank account movements in a different way so that you can obtain valuable information. Instead of following the daily order used by the bank, the treasury allows you to sort the movements by month using a digital treasury sheet, such as an Excel spreadsheet. In column 1 of your Excel spreadsheet, you enter the month you are currently in and add the next 18 months.

Each month, you should review the actual movements of your bank account and adjust the next 18 months in your cash flow sheet. You should complete the Excel by filling in estimated data (made up in your head), following the cash basis; you only enter in the Excel when you expect to collect for sure and when you expect payments, only cash outflows and inflows.

To be prudent, you should include payments as early as possible and collections as late as possible. The goal is to find the worst month, the month with the most negative ending cash balance. Finding the month with the highest negative balance will tell you which month you need the most money. All months with a negative balance are dangerous, as you are in the valley of death.

The worst month, which is when it starts to become less negative, is when you break even. This means that while you pay more than you collect, you do not generate free cash. When you break even, you start to generate free cash and the negative balance starts to decrease.

It is important not to put the financing into the cash flow, neither the cash inflow nor the cash outflow to pay it back, as that is what is being estimated. The project must be economically viable, regardless of the funding. For now, it does not matter where the funding will come from, as this will be dealt with later in financial viability. Providing funding for a project that is not economically viable is a very serious mistake that many entrepreneurs make and which can lead to a delicate situation.

You should calculate the ending balance for each month and notice how each month becomes more negative, looking for the inflection month which is just when you start to break even. This is usually month 8-9.

Treasury is an essential tool for entrepreneurs, as it allows you to take into account information that accounting does not provide. For example, you can have an accounting profit and go into default due to a lack of cash. Classic general accounting comes late and records past events, so it is necessary to use the forecast of future cash flow for the next 18 months to discover in time the problems of lack of money.

It is necessary to go out and look for financing long before you need it and anticipate liquidity problems. If you already have activity or other products in place, you should only take into account new costs and new receipts, i.e. if you launch a new product or go to a new market or country, only the differential payments and receipts that appear for this new project that you are launching.

In a nutshell, treasury is a key tool for entrepreneurs, as it allows them to plan, anticipate liquidity problems and avoid the lack of liquidity that can kill many companies every year. It is an activity that cannot be delegated and must be carried out personally, and a simple tool, such as an Excel sheet, can be used to make a cash flow forecast for the next 18 months.

Steps to calculate cash flow in the first 18 months. Cash flow sheet

Determining the cash flow for the first 18 months of a new business can be a challenging task, but it is critical in helping the business determine how much funding it needs. 

Here are some steps that can help a company determine its cash flow:

  1. Estimate Sales Collections (+): The business should have a clear understanding of the customer revenues (customers only, no banks, investors or financing) it expects to generate in the first 18 months of operation. This may require a clear understanding of the market and demand for the products or services it offers.
  2. Estimate costs (+): The business should have a clear understanding of the costs associated with starting and operating the business. This may include fixed costs, such as rent and utilities, as well as variable costs, such as advertising and marketing, salaries and materials costs.
  3. Estimated investment in assets (+): The company must consider the costs associated with the acquisition of fixed assets, such as machinery and equipment. These costs can affect cash flow in the first 18 months of operation.
  4. Estimate cash flow: Once the business has a clear understanding of its revenues and expenses, it can estimate its cash flow for the first 18 months. This can help the business to identify potential liquidity problems and to plan the financing required to meet its cash flow needs.
  5. Need for funding: By analysing the opening balance of your cash flow estimate, you can determine how much funding you will need to cover your cash flow needs for the first 18 months. 

By following these steps, a new business can determine its cash flow for the first 18 months of operation and plan the financing required to meet its cash flow needs. This can help ensure that the company has the resources it needs to operate successfully and grow in the long term. 

Do I have a profitable business? How can I see on my cash flow statement that I am not profitable?

To determine whether your business is profitable, you should review your cash sheet and pay attention to the opening cash balance each month. If you see that the opening balance becomes more negative each month and never changes its trend, it is likely that your business is not financially viable. In that case, you will need to review your sales price, sales volume or expenses to determine what aspects of your business model you can adjust.

It is important to bear in mind that an enterprise is economically viable when it has a valley of death (+) limited, i.e. your initial negative cash balances are limited to a certain number of months, e.g. no more than 18 months. During the first few months, it is logical that your payments will exceed your receipts and so you will need to increase your funding. However, as you approach the break-even point, your receipts will exceed your payments and you will be able to start repaying the funding.

To determine the break-even point (+), a cost and sales analysis is necessary. The break-even point is reached when total revenues equal total costs. In other words, it is the point at which your company is neither losing nor making money. If your company is not being profitable, you should conduct a review of the key aspects of your business to determine what is going wrong.


In a nutshell, To determine whether your business is profitable, you should review your cash sheet and pay attention to the opening cash balance each month. If this balance becomes increasingly negative and does not change its trend, you may need to review key aspects of your business to determine what is going wrong. The break-even point is the point at which your receipts exceed your payments and your business begins to turn a profit.


For example, let's say you have a company that sells beauty products online and your cash flow sheet shows a negative opening cash balance each month that is increasing rather than decreasing. This means that your business is not generating enough revenue to cover expenses and you need additional funding to keep it afloat.

When you analyse the data on your cash flow sheet, you discover that your company has a break-even point of 6 months, which means that it will take you 6 months to reach a level of sales that will allow you to cover all your expenses without additional financing.

After analysing your sales, you discover that your products have a low profit margin and that you need to adjust your prices to make more margin and reduce your costs. You also decide to improve your marketing efforts to increase your sales and get more customers.

By implementing these changes, you manage to increase your sales and improve your profit margin, which allows you to break even after 6 months. From then on, your business starts to generate profits and you no longer need additional financing.

In this practical example, the cash flow sheet allowed you to identify that your business was not profitable and to discover the changes needed to improve your profit margin and break even. With this information, you were able to make informed decisions and adjustments to improve the profitability of your business.




  1. How much funding do you need?
  2. What is your cash flow forecast for the coming months?
  3. How are you going to use the funding?
  4. How much will you pay back month by month?
  5. How many months can you survive in a critical scenario without any income and only with the money you have on hand?
  6. How many expenses do you have to finance until customer collections exceed the break-even point?
  7. What is the key piece of data/information that is obtained or deduced when completing the treasury sheet?


Suppose an entrepreneur named John is launching a new digital marketing services company and decides to make a cash flow forecast for the next 18 months. He uses an Excel sheet to make this forecast and starts with the current month. In column 1, he writes the month he is currently in and adds the next 18 months.

As the month progresses, John reviews the actual movements in his bank account and adjusts his cash forecast for the next 18 months, adding one more month to the Excel. John completes the Excel sheet by filling in estimated data, following the cash basis. He only enters in the Excel sheet when he expects to get paid for sure and when he expects to make payments, only cash outflows and cash inflows.

John makes sure to include payments as early as possible and collections as late as possible in order to be prudent. His aim is to find out the worst month, the one with the most negative ending cash balance, so that he can anticipate any cash flow problems.

As he reviews his cash sheet each month, John realises that some of his costs are higher than he had anticipated and that his sales are not increasing as quickly as he had hoped. He also realises that some of his customers are slow to pay him, causing him to have cash flow problems in some months.

With this information, Juan makes adjustments to his pricing and marketing strategy to attract more customers and increase his revenues. He also works on reducing some of his costs to improve his profit margin. In addition, he decides that he needs to be stricter in following up on payments from his customers to ensure that he receives the money on time.

Thanks to his cash flow sheet, Juan can make informed decisions about his business and make adjustments to improve his profitability and avoid liquidity problems. Reviewing his cash flow forecast every month helps him stay on top of changes in his business and take proactive steps to ensure his long-term success.



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