Track small business cash flow without spreadsheets

Still tracking income and expenses on a spreadsheet? Here’s why you should make the switch to low-cost alternatives.

Small business owner looking at cash flow tracking software on their computer

Small business cash flow

Money in, money out. Cash flow is one of the most important measures of your business's health. But how do you monitor it?

It sounds simple to track sales on the one hand and expenses on the other – then compare the two. But a huge proportion of failed businesses say they closed down because of financial mismanagement, including issues such as lack of cash flow visibility. In other words, they didn’t know if they were making more than they were spending.

Why are people losing sight of cash flow?

Everyone knows a business needs to stay in the black. It’s not a new idea. So it can be hard to imagine why a business would lose sight of cash flow. Until, that is, you’re in business yourself. It’s then that you realise tracking small business cash flow isn’t as easy as it seems.

You have to:

  • keep track of all your expense receipts (which gets really tricky if there are multiple people making purchases)
  • record all your sales revenue (making sure to account for discounts you might have given)
  • enter everything into your cash flow Excel spreadsheet or Google Sheet (including double and triple checks to make sure everything is entered correctly)

You may have to rely on employees or business partners to supply a lot of this information. Their paperwork will sometimes have scribbled notes in the margins, requiring a follow-up phone call. It takes a lot of time, patience and energy before you’re even ready to punch the numbers into a spreadsheet.

Data entry slows you down

Your cash flow Excel spreadsheet or Google Sheet is probably a monster. The number of columns and rows will have grown substantially since you first set out on your own. Plugging in the numbers takes time, and a lot of it. Unfortunately it’s not a job you can rush because you need the spreadsheet to be as accurate as possible.

The large amount of time required results in two common issues:

  • The task gets pushed back repeatedly so you go for long periods without knowing your cash flow position
  • Because there are gaps in your data, you’re not able to see how the business performs from day to day

Mistakes creep in

No matter how much you slave over your spreadsheet, there’ll be mistakes. Up to 90 percent of spreadsheets contain data entry errors. You’ll find the big ones because the numbers will look wrong and so you’ll trawl through to find the cause. It’ll be slow, frustrating work but you’ll probably weed them out in the end. The smaller mistakes are more likely to sneak through, where they’ll add up, bit by bit, to undermine your data. It’s not great for your confidence.

Cash flow information is old before you see it

Even if you're vigilant, there’s a lag between when a sale or expenditure happens and when it’s entered into your cash flow Excel spreadsheet or Google Sheet. And you still won’t see it until you create charts or graphs from those spreadsheets. In this scenario, you’re taking a series of snapshots of your cash flow, and there can be big blind spots in between.

As business picks up – with more sales and more expenditure happening all the time – those blind spots become more significant.

  • More things happen in between each cash flow snapshot
  • Cash flow snapshots get further apart because you’re too busy to update spreadsheets

Cash flow is about more than red and black

There are many reasons why you need to know your cash flow situation. Obviously you have to understand if you’re making money or losing it. That’s the most basic form of cash flow visibility. But there’s more to it than that.

If you can see your cash flow in detail, you can spot opportunities, or troubleshoot problems before they become too big.

If you’re seeing profit spikes during certain periods, you could:

  • bring in more employees to help maximise those opportunities
  • think of ways to cross-sell or upsell those customers
  • consider marketing campaigns that will bring those customers back during slow times

If revenue is flat during certain periods, you could:

  • run sales promotions
  • experiment with different products or services
  • reorganise employee schedules to lower your expenses during those times

Cash flow visibility is a strategic advantage. By understanding how revenue and expenses change from day to day, you can tweak your business model to find what works best for your situation.

Step away from the spreadsheet

Spreadsheets are remarkable tools. They’re by far the world’s most common accounting software. And for micro-businesses with relatively limited activity, they’re a good fit. But as you perform more transactions with more customers and vendors, they get in the way of cash flow visibility, cutting off your view of the business’s health.

To see if spreadsheets are fit for purpose in your business, ask yourself these questions:

  • Are they getting hard to maintain?
  • How confident are you in the data that’s been entered?
  • Do you actually know what your small business cash flow looks like?

There are cost-effective alternatives. Accounting software will eliminate the data entry and give you a daily view of small business cash flow – on your desktop or phone.

Accounting software automatically calculates your cash flow, showing a summary of money in and money out. It will even tell you what you're owed and which bills are coming due.

Here’s how it works

Cloud accounting software is generally sold on a flat monthly subscription. You don’t need to download anything and you can run it easily off your existing laptop, desktop or smartphone. You just sign up online and get started.

  • It can link to your business bank account (and point-of-sale system) to track sales and expenses as they happen, with no data entry from you
  • Because the data comes straight from the bank, it’s clean and accurate
  • Smart accounting software will also send out your invoices, so it shows what you’re owed
  • The system pools all the data to create a dashboard of your financial situation, which is automatically updated every day

Accounting software probably only needs to save you one or two hours a month to pay for itself. In reality, it will do that many times over.

Getting started

As easy and intuitive as online accounting software has become, you may prefer to have an accountant or bookkeeper set it up and/or run it for you. They can then share the dashboards with you.

Or you can do it yourself by starting a free trial and following the how-to videos.

Small business cash flow is everything

Money in and money out is the ultimate measure of business health and sustainability. You should watch it carefully, even if that means manually updating your cash flow Excel spreadsheet or Google Sheet. The effort is well worth it.

If, however, you’d rather spend the time on other parts of your business – or with your family – take a look at cloud accounting software. It can automate the process for you. That's why 98% of users of accounting software recommend it to others.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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