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Home > Blog > Google Sheets

Cash Flow Analysis: How to Do It with a Practical Example

Depreciation measures how that value decreases. On the other hand, amortization is breaking down the initial cost of an asset. Depreciation and amortization data are visualized through your Income Statement, enhancing insights through visual analytics. A cash flow analysis is one of the most significant ways a business can use to analyze inflows and outflows.

Why?

Well, this analysis shows what your business does with income. Besides, it can help you streamline internal operations and make data-backed decisions.

analyzing cash flow

Analyzing cash flow does not have to be time-consuming and complex. Yes, you read that right.

Google Sheets lacks ready-made charts for analyzing cash flow. You don’t have to ditch your Google Sheets in favor of other costly tools in the market.

You can improve your Google Sheets by installing third-party apps (add-ons) to access ready-made and visually appealing charts for analyzing cash flow. This will enable you to access ready-made and easy-to-use charts for survey data visualization.

In this blog, you’ll learn:

Table of Content:

  1. Understanding Cash Flow Analysis
  2. Video Tutorial: How to Analyze Cash Flow in Google Sheets?
  3. Why is Cash Flow Analysis Important?
  4. Basics of Analyzing the Cash Flow
  5. How to Estimate Cash Flows?
  6. Types of Cash Flows
  7. Cash Flow Statement Features
  8. How to Calculate a Cash Flow? Cash Flow Formula
  9. How to Perform Cash Flow Analysis: Step-By-Step
  10. Examples of Cash Flow Analysis
  11. Analyzing Cash Flow: Best Practices
  12. Limitations of Cash Flow Analysis
  13. Cash Flow Analysis FAQs
  14. Wrap Up

Before jumping into the blog’s core, we’ll address the following question: what is cash flow analysis?

Understanding Cash Flow Analysis

A cash flow statement summarizes the amount of cash and cash equivalents entering and leaving your business.

Besides, it measures how well your business is managing its cash position. Or how efficiently your business meets its debt obligations and funds its operating expenses.

cash flow analysis

Analyzing cash flow complements the balance sheet and income statement and is a mandatory part of a company’s financial reports.

Remember, a cash flow statement is just a table with figures. Imagine analyzing cash flow statements dating back, let’s say, two previous financial years. The table would likely be long and intimidating due to the volume of data.

This means for you to extract actionable insights from your cash flow statement, you have to use charts and graphs.

This is where a visualization related to cash flow comes in.

Like we said earlier, if your visualization tool lacks an inbuilt visualization for Cash Flow Analysis, worry not.

In a moment, we’ll be discussing an easy-to-use method you can use to visualize your 3-statement financial model.

Like the Balance Sheet, the Cash Flow/Funds flow Diagram provides information on the financial health of your business.

More so, it’s the go-to piece of information for investors with intentions to increase their equity in your business.

So, what’s Cash Flow? 

Cash flow is the net amount of cash and cash equivalents going in and out of your business.

It’s made up of two key components: cash received and spent.

Cash received represents inflows, while money spent represents outflows. Your business’s ability to create value for investors is fundamentally determined by its ability to generate positive free cash flows.

Free Cash Flow is the cash your business generates from its operations after deducting capital expenditures.

Video Tutorial: How to Analyze Cash Flow in Google Sheets?

In the following video, you will learn how to analyze Cash Flow in Google Sheets with the help of a video tutorial.

In the coming section, we’ll address the following question: why is cash flow analysis important?

Why is Cash Flow Analysis Important?

As we said, analyzing cash flow is an essential element of your financial analysis.

This implies you need a proper and easy-to-interpret Cash Flow forecast in Google Sheets or through Power BI income statement to go beyond the surface of your data and uncover hidden insights. Visualizing your cash flow data requires specialized charts specifically designed for this job.

However, popular spreadsheet tools, such as Google Sheets, lack this chart.

This is where a Cash Flow generator comes in.

In the ensuing section, we’ll address the basics of analyzing the cash flow.

Basics of Analyzing the Cash Flow

Analyzing cash flow requires you to generate the following statements namely operating, investing, and financing cash flow.

Cash from operating activities represents money received from customers, less the amount spent on operating expenses, including those recorded in a small business expense report. Investing activities reflect funds spent on fixed assets and financial instruments.

To gain deeper insights into these financial flows, you can analyze a Chord diagram, which visually represents the relationships and flows between different financial activities and accounts.

Also, they’re long-term and include properties and assets in a plant or the purchase of stock or securities of another company.

How to Estimate Cash Flows?

Identify Cash Inflows

  • Revenue: Start with your expected sales or service income.
  • Investments: Include expected returns from investments or asset sales.
  • Loans and Financing: Account for any incoming funds from loans or credit.

Estimate Cash Outflows

  • Operating Expenses: List costs like rent, utilities, and salaries.
  • Cost of Goods Sold (COGS): Account for expenses directly tied to the production of goods or services
  • Debt Repayment: Account for any loan repayments, including interest.

Calculate Net Cash Flow

  • Subtract total cash outflows from total cash inflows. This provides the net cash flow for the specified period.

Project Over Time

  • Estimate cash flows over several periods (monthly, quarterly, yearly) to get a clearer picture of future financial health.

Adjust for Variables

  • Consider potential changes in revenue, expenses, or external factors. Adjust your estimates to account for these variables.

Types of Cash Flows

There are three types of cash flows, namely:

  1. Operating cash flow
  2. Cash flow from investments
  3. Cash flow from financing

Operating cash flow is generated from your operations. And it includes cash sales and the cost of goods sold (utilities, salaries, etc).

Conversely, cash flow from investments is the money spent on buying stocks or bonds. Cash inflow is generated by interest and dividends paid on these securities.

Lastly, financing cash flow is the expense of acquiring capital.

So, what are the cash flow statement features?

Cash Flow Statement Features

A Cash Flow Statement is very dynamic because it records the investment of cash from the start to the end of a particular financial year. This statement does not recognize matching principles. Additionally, you can use it to calculate cash flows from operations and calculate return on investment capital, providing valuable insights into the overall financial health of a business.

Besides, it displays the changes in your financial positions associated with operational, investing, and financial activities. For a more comprehensive view, you might also consider using an income statement template to track and analyze your financial performance.

How to Calculate a Cash Flow? Cash Flow Formula

Calculating a cash flow is not complicated.

And this is because it’s a reflection of your business’s cash in and outflows. The simplicity ends there for most small business owners. We recommend every business owner to take time and understand cash flow calculations.

Below are the 3 key cash flow formulas you can use.

  • Free Cash Flow Formula

One of the key cash flow formulas is Free Cash Flow (FCF).

While a traditional cash flow statement gives you a picture of your cash flow at a given time, it doesn’t help with planning and budgeting. This is because it does not reflect available cash. For effective financial planning, learning how to create a monthly budget in Excel can be a valuable tool.

Calculating Free Cash Flow is easier than you think. To start, generate your income statement.

First, let’s define some terms to make everything easier for you.

  • Net Income

The net income is the total income left after deducting your costs from gross revenue. You’ll find the aforementioned details in the Income Statement.

  • Amortization and Depreciation

A huge chunk of your business assets loses value over time.

Depreciation measures how that value decreases. On the other hand, amortization is breaking down the initial cost of an asset. Depreciation and amortization data are visualized through your Income Statement, enhancing insights through visual analytics.

  • Working Capital

The working capital is the difference between assets and liabilities. Also, it represents the capital you use in your business operations.

Calculate your working capital using the total assets and liabilities on your Balance Sheet.

  • Capital Expenditure

Capital expenditure is the cash you spend on fixed assets, like land, real estate, etc. Capital expenditure data is in the Statement of Cash Flows.

Check out the final Free Cash Flow (FCF) formula.

Free Cash Flow = Net income + Depreciation/Amortization – Change in Working Capital – Capital Expenditure’

Look at the example below.

You’re a copywriter and intend to calculate your Free Cash Flow to evaluate whether it’s pragmatic to hire a virtual assistant.

Assume the figures below depict your finances.

  • Net income = $150,000
  • Depreciation/Amortization = $0
  • Change in Working Capital =  $20,000
  • Capital Expenditure = $3,500

So, your Free Cash Flow (FCF) is represented by:

$150,000 + $0 – $20,000 – $3,500 = $126,500

$126,500 is the Free Cash Flow (FCF) available to reinvest back into your business.

  • Operating Cash Flow Formula

While FCF shows the cash available to reinvest in the business, it doesn’t always paint a reliable picture of your normal cash flow.

This is because the Free Cash Flow (FCF) formula doesn’t account for:

  • Irregular spending
  • Earning
  • Investments

If you sell a high-value large asset, the FCF will go way up, which does reliably reflect your average cash flow.

To calculate an Operating Cash Flow, pull out your balance sheet and income statement.

First, let’s define some terms to make everything easier for you.

  • Operating Income Flow

The Operating Income is also the Earnings before Interest and Taxes (EBIT).

To calculate this metric, subtract operating expenses ( wages paid and cost of goods sold) from total revenue.

The Operating Cash formula (OCF) is:

Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital

Look at the example below.

  • Operating Income = $75,000
  • Depreciation = $0
  • Taxes = $11,000
  • Change in Working Capital = – $19,000

Operating Cash Flow formula is represented by:

$75,000 + $0 – $11,000 + (-$19,000) = $45,000

  • Cash Flow Forecast Formula

While Free and Operating Cash Flow gives you a good idea of income flow, they won’t help you with planning for the future. This is where forecasting your cash flow comes in.

Cash Flow Forecast is one of the easiest metrics to calculate.

Check out the CFF formula below.

Cash Flow Forecast (CFF) = Beginning Cash + Projected Inflows – Projected Outflows = Ending Cash

First, let’s define some terms to make everything easier for you.

  • Beginning Cash

Beginning income is the cash your business has on hand today. You can get this data in your Statement of Cash Flows.

  • Project Inflows

The project inflows are the income you expect to receive in a particular period. It includes current invoices that will come due. And future invoices you expect to receive cash for.

  • Project Outflows

The project outflows are the aggregate costs you incur in a given financial year.

Look at the example below.

  • Beginning cash = $60,000
  • Projected inflows for the next 90 days = $20,000
  • Project outflows for the next 90 days = $10,000

Check out the Cash Flow Forecast (CFF) formula below

$60,000 + $20,000 – $10,000 = $70,000

The CFF is $70,000

Keep reading because, in the coming section, we’ll address how to perform cash flow analysis.

How to Perform Cash Flow Analysis: Step-By-Step

Google Sheets is a trusted data visualization tool because it’s familiar and has been there for decades.

But the spreadsheet application lacks ready-made charts for analyzing cash flow also known as a funds flow diagram.

We understand switching tools is not an easy task.

This is why we’re not advocating you ditch Google Sheets in favor of other expensive data visualization tools.

There’s an easy-to-use and amazingly affordable visualization tool that comes as an add-in you can easily install in your Google Sheets with ready-made graphs for cash flow analysis. The tool is called ChartExpo.

So, what is ChartExpo?

ChartExpo is an incredibly intuitive add-on you can easily install in your Google Sheets without watching hours of YouTube tutorials.

With many ready-to-go visualizations, ChartExpo turns your complex, raw data into insightful charts for analyzing cash flow that tell the data stories in real-time.

  • ChartExpo is cloud-hosted, which makes it extremely light. You have a 100% guarantee that your browser won’t be slowed down.
  • You can export your insightful, easy-to-read, and intuitive charts in JPEG, PDF, SVG, and PNG format.
  • ChartExpo add-on is only $10 a month after the end of the trial period.
  • The easy-to-use app has an in-built library with a large number of easy-to-customize and ready-made charts in Google Sheets for your data stories.

In the coming section, we’ll take you through how to make a Sankey diagram in Google Sheets.

You don’t want to miss this!

Examples of Cash Flow Analysis

Example# 1:

This section will use a Sankey Diagram to visualize the tabular data below.

Revenue Revenue Detail Expenditure Expenditure Detail Outflows Count
Taxes Revenue Detail Expenditure Expenditure Detail Health 18.4
Taxes Revenue Detail Expenditure Expenditure Detail Education 7.3
Taxes Revenue Detail Expenditure Expenditure Detail Adv Education 5.2
Resource Royalties Revenue Detail Expenditure Expenditure Detail Human Services 4.2
Investment Income Revenue Detail Expenditure Expenditure Detail Treasury Board 1.4
Federal Transfers Revenue Detail Expenditure Expenditure Detail Justice 1.3
Other Revenue Revenue Detail Expenditure Expenditure Detail Other Ministries 5.2

To install ChartExpo, an add-in for Google Sheets, click this link.

  • Open your Google Sheets application.
  • Open the worksheet and click the Extensions menu.
  • Then click Charts, Graphs, & Visualizations by ChartExpo.
  • Finally, click the Open button in the dropdown.
open chartexpo in google sheets
  • Click the Add New Chart button to access your fully stocked library of charts.
add new chart in google sheets
  • Once ChartExpo is loaded, you will see a list of charts. Look for the “Sankey Chart”, as shown below.
search sankey chart in google sheets
  • Select the sheet holding your data and the Metrics Fill in the numerical numbers (in our case, we’ll use count).
  • Select the Dimensions button and fill in the dimensional data (in our example, we’ll use Revenue, Revenue Detail, Expenditure, Expenditure Detail, and Outflows), as shown below.
  • Finish the simple process by clicking the Create Chart button.
create sankey chart in google sheets
  • Check out the final chart below.
sankey chart in google sheets

Example # 2:

This section will use a Sankey Diagram (cash flow analysis-friendly chart) to visualize the data below.

Total Budget Departments Spending Amounts
Total Budget Salaries Team 26
Total Budget Salaries Drivers 13
Total Budget Salaries Directors 3
Total Budget Research & Development Wind Tunnel Testing 16
Total Budget Research & Development Other R&D 15
Total Budget Research & Development Track Testing 10
Total Budget Production Customer Engine Supply 20
Total Budget Production Manufacturing 13
Total Budget Production Engine 3
Total Budget Production Monocoque 1
Total Budget Production Gearbox 1
Total Budget Production Other 1
Total Budget Operations Logistics 13
Total Budget Operations Entertainment 10
Total Budget Operations Freight 5
Total Budget Operations IT 4
Total Budget Operations Factory and Utilities 2
Total Budget Operations Professional Services 2
Total Budget Operations Fuel 1
  • To get started with Cash Flow Analysis Examples, install the ChartExpo add-in for Google Sheets from this link.
  • Now head to the Extensions button > Chart, Graphs & Visualizations by ChartExpo > Open.
  • Click the Add New Chart button to access your fully stocked library of charts.
  • Click the Search box and type “Sankey Chart”.
  • It should pop up together with other charts, as shown.
  • Select the sheet holding your data and select the Metrics option. Fill in the numerical numbers (in this scenario, we’ll fill in Amounts).
  • Select the Dimensions button and fill in the dimensional data (in our example, we’ll use Total budget, Departments, & Spending).
  • Click the Create Chart button, as shown.
create sankey chart in google sheets
  • Check out the final chart below.
cash flow analysis graph

Insights:

Some insights from the above Diagram include the following:

  • The company spent significantly on salaries and research & development, with 52% of the budget.
  • Production has the 2nd highest department on which the company spends 25% of the budget.

Steps to Make Sankey Chart in Google Sheets:

  1. Open your Google Sheets Application.
  2. Install ChartExpo Add-in for Google Sheets from Google Workspace Marketplace.
  3. Select the Sankey Chart from the list of charts.
  4. Fill in the necessary fields.
  5. Click on the “Create Chart” button.
  6. Customize your chart properties to add header, axis, legends, and other required information.
  7. Export your chart and share it with your audience.

The following video will help you to create a Sankey Chart in Google Sheets.

Analyzing Cash Flow: Best Practices

Monitor Regularly

  • Frequency: Review cash flow statements monthly to stay updated on financial health.

Compare Periods

  • Trend Analysis: Compare current cash flow with previous periods to trend analysis and changes.

Analyze Variances

  • Identify Differences: Examine significant variances between actual and projected cash flows to understand the causes.

Evaluate Cash Sources and Uses

  • Source and Use: Assess where cash is coming from and how it’s being spent to ensure efficient management.

Incorporate Other Metrics

  • Comprehensive View: Use alongside profitability, liquidity, and solvency ratios for a complete financial analysis.

Limitations of Cash Flow Analysis

  1. Doesn’t Show Profitability: Focuses on cash, not overall profit.
  2. Ignores Non-Cash Expenses: Overlooks costs like depreciation.
  3. Timing Issues: Cash flow can vary due to payment timing.
  4. Incomplete Picture: Needs other metrics for full financial analysis.
  5. Manipulation Risk: Cash flow can be artificially improved.

Note: You can also use ChartExpo to Cash Flow Diagram in Excel for analyzing cash flow.

Cash Flow Analysis FAQs

How to Read a Cash Flow Statement?

Operating Activities

  • Check Net Cash from Operations: Indicates cash generated or used by core business activities.

Financing Activities

  • Examine Debt and Equity Changes: Includes cash flows from issuing or repaying loans and equity transactions.

Net Cash Flow

  • Calculate Total Change: Combine all sections to see the overall increase or decrease in cash.

Ending Cash Balance

  • Assess Liquidity: Verify the cash available at the end of the period to gauge financial stability.

What is the purpose of cash flow analysis?

The cash flow analysis presents sources and uses of money in your business. Besides, it measures how well your business is managing its cash position.

There are three unique formulas you can use to determine the cash flow position of your business. They include:

  • Cash Flow Forecast
  • Free Cash Flow
  • Operating Cash Flow

What Cash Flow Analysis Can Tell You?

  1. Liquidity: This shows how well a company manages its cash to meet short-term obligations.
  2. Operational Efficiency: Indicates how effectively a company generates cash from its core business activities.
  3. Financial Health: Reveals the company’s ability to sustain operations, invest in growth, and manage debt.
  4. Investment Potential: Helps assess whether a company has the cash flow to fund future projects or expansions.

Wrap Up

A cash flow analysis is one of the most significant ways a business can use to analyze inflows and outflows.

Why?

Well, this analysis shows what your business does with income. Besides, it can help you streamline internal operations and make data-backed decisions.

Analyzing cash flow does not have to be time-consuming and complex. Yes, you read that right.

Google Sheets lacks ready-made charts for analyzing cash flow.

You don’t have to ditch your Google Sheets in favor of other costly tools in the market.

So, what’s the solution?

We recommend you install third-party apps, such as ChartExpo, to access ready-to-use charts for analyzing cash flow.

ChartExpo is an add-on for Google Sheets that’s loaded with insightful and ready-to-go graphs for analyzing cash flow. You don’t need programming or coding skills to use ChartExpo.

More benefits

  • ChartExpo is cloud-hosted, which makes it extremely light. You have a 100% guarantee that your browser won’t be slowed down.
  • You can export your insightful, easy-to-read, and intuitive charts in JPEG, PDF, SVG, and PNG format.
  • ChartExpo add-on is only $10 a month after the end of the trial period.
  • The easy-to-use app has an in-built library with over 50 easy-to-customize and ready-made charts for your data stories.

Sign up for a 7-day free trial today to access ready-made visualization for cash flow analysis that is easy to interpret and visually appealing to your target audience.

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