Remember, non-cash expenses such as depreciation can make your profits look negative, while your cash flow is positive . And you could also be showing a profit but have negative cash flow . Preparing a cash flow projection is a something like preparing your budget and balancing your checkbook at the same time. Unlike the income statement, a cash flow statement deals only with actual cash transactions. Depreciation, a non-cash transaction, does not appear on a cash flow statement.
Cash is generated primarily by sales.
But in most businesses, not all sales are cash sales. The level of detail needed in your cash flow projection will vary depending on the complexity of your business. You should set up your cash flow projections using a PC spreadsheet. After the initial setup, this will make the process much faster. An as shown in the examples, you can use the worksheet to help estimate amounts you have available to invest or will need to borrow.