For many first-time entrepreneurs, the term “cash flow” conjures up images of complex accounting systems or puzzling terminology. Typically the responses I get as to why they can’t do the cash flow are:

“I’m not good with numbers”

“I’m the creative/entrepreneurial type”

“It looks complicated”

“I don’t know what’s going to happen in the future”

Over the years I’ve come to realize that there are three major reasons why people are uneasy about doing the “numbers”:

They’ve never budgeted before

A cash flow is another word for budgeting; specifically, budgeting on a monthly basis. What revenue do you expect is going to come in and what expenses do you expect are going to leave your hands, each month?  Here’s a realization: How many of us actually budget for our own lives? For most Canadians the answer is under half (the latest estimation is that only 47% percent of Canadians use a budget to plan their spending). You can see that if you don’t like budgeting for your personal life it will seem just as foreign as when you do it for your business.  The good news is that when you start to budget for your business this can force you to think about your personal budget. Yes, that may scare you, but who said being an entrepreneur was going to be comfortable?

They’re uncomfortable with projecting

Speaking about being uncomfortable, most of us are uneasy about estimating what will happen in the future. Doing a cash flow is exactly about that – projecting sales and expenses.  Yet, we still plan our day, make shopping lists, schedule meetings etc. We anticipate certain outcomes.  The significance of the sales projection is to get you to think and commit to activities you need to do each month to drive sales. The more specific you get when you plan the activity, the more likely you will be to have success in that area (i.e. network twice a week, post daily on facebook,etc).  The same is true in estimating expenses (but please don’t use the “miscellaneous line” in expenses – know what you plan on spending).  This makes the cash flow an effective tool in decision making. It’s never perfect, but the more you do this exercise the better you get.

They have certain beliefs about money

The biggest source of unease in doing the cash flow is coming to terms with your relationship with money.  Do you watch what you spend? Do you spend money easily? Are you poor at saving? How much do you believe you’re worth? What do believe about people who make a lot of money? How you answer these questions and your feelings around money will play an important role in how you view the cash flow – it’s either a burden or a useful tool.  This could also be a good time to re-evaluate your relationship with money. For example, if you’re a person who spends money easily (beyond your means) instead of feeling that you have to give up a “lifestyle” you could look at the fact that monitoring your finances helps you prioritize what’s really important to you (like starting a business).

Our relationship with money is ongoing. It can change. The cash flow is a work in progress. It can change. It means you have to sit down and do the numbers. You may still dislike doing the cash flow, but at least you can appreciate its worth.

Written By: Dominik Loncar, Futurpreneur Canada Entrepreneur-in-Residence, dloncar@futurpreneur.ca