Business plan for a beauty salon: cash flow decisions

Website design By BotEap.comCreating a business plan for your beauty salon presents the perfect opportunity to create a functional cash flow statement (sometimes called a cash flow statement). This will allow you to make key cash flow decisions in the future.

Website design By BotEap.comCreation of the cash flow statement

Website design By BotEap.comIt is highly recommended to start with an Excel template or sample financial model of some sort for your salon’s cash flow statement. It does not have to be a model designed specifically for a beauty salon, but it must be for a similar business (i.e. one that generates income through services and product sales, pays rent for a location, etc.) to qualify. Minimal customization required. Starting with a template can save a lot of time creating your return.

Website design By BotEap.comThree sections of a statement of cash flows

Website design By BotEap.comThis will describe cash inflows and outflows in three areas: operating activities, investing activities, and financing activities.

Website design By BotEap.comOperating activities include cash received from customers in the form of sales and cash paid for operating expenses. This will generally represent the highest inflows and outflows on the cash flow statement and should result in a positive number each month for a profitable business.

Website design By BotEap.comInvesting activities do not mean the purchase of stocks or bonds by the company (although this type of rare activity would be included here). They are generally activities where the room invests in itself. Whenever a capital purchase of an asset (equipment, room lease improvements, furniture, etc.) is made, the payments made will represent a cash outflow. If these assets are ever sold, the money contributed will represent a cash inflow here. In general, a business in operation will have a negative cash flow in the investment area.

Website design By BotEap.comFinancing activities are related to the financing of the company by investors and lenders. When financiers put money into the company in the form of equity or debt capital, this represents a cash inflow here. When dividends are paid, shares are bought back from equity investors, or loan principal is returned to lenders, financing shows cash outflows. Please note that the payment of interest on loans represents an operating activity in the United States.

Website design By BotEap.comcash reserves

Website design By BotEap.comBy seeing how low the ending cash balance falls each quarter, month, or week, you can determine the size of the cash reserves the business will need. Make sure cash reserves cover all negative balances and at least thousands of dollars more as a cushion to prepare for cost overruns or revenue shortfalls.