The starting cash is often an important logical check

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Unformatted text preview: ss; an amount equal to what you think should be your business checking account bank balance when you start. After that, you continue working with other tables in your plan, including Sales Forecast, Personnel, and Profit and Loss, developing estimates for the values in those tables. If you are like most start-ups, as you refine your estimates you’ll discover that your Cash Flow table has a negative balance. If you do have this negative balance, that’s an indication of typical negative cash flow of start-up companies. To complete your plan, you’ll have to go back to the Start-up table and increase the estimate for starting cash until the starting cash is enough to eliminate any negative balances in the cash flow projections for the following months. For example, if your cash flow indicates a negative balance of -$8,000 in the worst month, and your original estimate of starting cash was $15,000, then you would need to increase your estimated starting cash by $8,000 to cover the estimated deficit in the cash flow for the first few months. That would require a starting cash balance of $23,000 ($15K + $8K). In the example the starting cash is $25,000 instead of $23,000 because that’s a round number and adds a slight cash buffer. Ultimately the cash in the starting balance comes from the money you raise as loans and investments. If you need more cash, you need to raise more money. If you raise more money, then you need to increase your cash. The starting cash is often an important logical check, which you increase or decrease to make your balance correct. In the example, this company is raising $50,350 as a combination of loans and investments, and it has a total of $50,350 combined between start-up expenses and start-up assets, so its start-up table is correctly balanced. If it had raised $100,000, but you only had $50,350 in assets and expenses, then it would have lost $49,650 as accounted-for funding. It could correct that situation by putting an extra $49,650 into i...
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