For many, the term “cash flow” conjures up visions of a daunting task that requires the expertise of a team of accountants. In reality, however, it is a handy, easy-to-use planning tool. While we typically think of it as primarily used by corporate entities – again with a line-up of accounts in their employ – it is equally helpful for small businesses and non-profit organizations of any size. It is even a great personal aid for planning a vacation, buying a house, or when you need to know when and how much available cash you will have at a future date.
In broad strokes, calculating cash flow for the coming year can be a simple, back-of-the-envelope exercise. As a personal planning tool, it can help you determine how long it will take you to save for a trip, home renovation or new car, or help you think about what actions you might take to achieve your goal sooner.