Beauty Salon Business Plan: Cash Flow Decisions

Creating a business plan for your salon presents the perfect opportunity for you to create a functional cash flow statement (sometimes called a cash flow statement). This will allow you to make key decisions about cash flow in the future.

Creation of the cash flow statement

It is highly recommended to start with an Excel template or a financial model example of some kind for your salon cash flow statement. It does not have to be a model specifically designed 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.) of so that minimal customization is required. Starting with a template can save a lot of time in creating the statement.

Three sections of a cash flow statement

This will describe the cash inflows and outflows in three areas: operating activities, investing activities, and financing activities.

Operating 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 company.

Investing activities do not mean the purchase of stocks or bonds by the company (although this type of unusual activity would be included here). These are generally activities in which the classroom invests in itself. Whenever there is a capital purchase of an asset (equipment, leased room improvements, furniture, etc.), the payments made will represent a cash outflow. If these assets are ever sold, the money entered will represent a cash inflow here. Generally, a going concern will have negative cash flow in the investment area.

Financing activities are related to the financing of the company by investors and lenders. When funders invest money in the business in the form of equity or debt, this represents a cash inflow here. When dividends are paid, shares are repurchased from equity investors, or the loan principal is repaid to lenders, the financing shows cash outflows. Please note that the payment of interest on loans represents an operating activity in the United States.

Cash reserves

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