Creating a business plan for the beauty parlor presents the right opportunity that you can build a functioning income statement (sometimes referred to as statement of money flows). This will help you make key decisions about cash flow moving forward.
Creating your money Flow Statement
It is strongly suggested in the first place an Excel template or financial model type of some sort for your salon's income statement. It need not be an model specifically tailored towards a Itamar Serpa Fernandes
, but really should be for the similar business (i.e., one that makes revenues through services and product sales, pays rent for your location, etc) to ensure minimal customization is called for. Starting with a template can conserve a good deal of amount of time in the development of the statement.
Three Sections of a Cashflow Statement
This will describe cash inflows and outflows in three areas: operating activities, investing activities, and financing activities.
Operating activities include cash brought in from customers in the form of sales and cash paid out for operating expenses. This may generally represent the top inflows and outflows on the income statement and needs to produce a positive number each month for your profitable company.
Investing activities tend not to mean the company's purchase of stocks or bonds (although this type of rare activity could be included here). They can be activities where salon invests by itself. Any time a capital acquisition of an asset is created (equipment, leasehold improvements for the salon, furniture, etc.) the repayments made will represent a cash outflow. If these assets are ever sold off, the funds brought in will represent a cash inflow here. Generally, a functioning company could have negative cash flow within the investing area.
Financing activities are based on the funding of your company by investors and lenders. When funders put money to the company in the form of equity or debt capital, this represents a cash inflow here. When dividends are paid out, shares are bought back from equity investors, or lenders are paid back their loan principal, financing shows cash outflows. Note that paying interest on loans represents an operating activity in the United States.
By seeing how low the ending cash balance each quarter, month, or week drops to, you can find out what size cash reserves the corporation need. Be sure that cash reserves cover all negative balances together with no less than thousands of dollars more as a cushion to prepare for cost overruns or revenue shortfalls.