| Creating a business plan for your beauty salon | | | | activity would be included here). They are generally |
| presents the perfect opportunity for you to create a | | | | activities where the salon invests in itself. Whenever a |
| functioning cash flow statement (sometimes called the | | | | capital purchase of an asset is made (equipment, |
| statement of cash flows). This will allow you to make | | | | leasehold improvements to the salon, furniture, etc.) the |
| key decisions about cash flow going forward. | | | | payments made will represent a cash outflow. If these |
| Creating the Cash Flow Statement | | | | assets are ever sold off, the money brought in will |
| It is highly recommended to start with an Excel | | | | represent a cash inflow here. Generally, a functioning |
| template or financial model example of some kind for | | | | company will have negative cash flow in the investing |
| your salon's cash flow statement. It need not be an | | | | area. |
| model specifically tailored towards a beauty salon, but | | | | Financing activities are related to the funding of the |
| should be for a similar business (i.e., one that makes | | | | company by investors and lenders. When funders put |
| revenues through services and product sales, pays | | | | money into the company in the form of equity or debt |
| rent for a location, etc) so that minimal customization is | | | | capital, this represents a cash inflow here. When |
| required. Starting with a template can save a great | | | | dividends are paid out, shares are bought back from |
| deal of time in the creation of the statement. | | | | equity investors, or lenders are paid back their loan |
| Three Sections of a Cash Flow Statement | | | | principal, financing shows cash outflows. Note that |
| This will describe cash inflows and outflows in three | | | | paying interest on loans represents an operating |
| areas: operating activities, investing activities, and | | | | activity in the United States. |
| financing activities. | | | | Cash Reserves |
| Operating activities include cash brought in from | | | | By seeing how low the ending cash balance each |
| customers in the form of sales and cash paid out for | | | | quarter, month, or week drops to, you can determine |
| operating expenses. This will generally represent the | | | | what size cash reserves the company will need. Make |
| highest inflows and outflows on the cash flow | | | | sure that cash reserves cover all negative balances |
| statement and should result in a positive number each | | | | as well as at least thousands of dollars more as a |
| month for a profitable company. | | | | cushion to prepare for cost overruns or revenue |
| Investing activities do not mean the company's | | | | shortfalls. |
| purchase of stocks or bonds (although this kind of rare | | | | |