It can be seen from the cash flow format below that cash flows are normally separated into three different categories.
Firstly the cash flow from operating activities represents cash from the day to day trading operations of the business. This section starts with the net income of the business from the income statement, and then adjusts this for non-cash flow items such as depreciation, and cash used to provide working capital .
Cash flow from financing activities.
Finally the cash flows from financing activities relate to amounts of cash received from equity and debt financing less cash used to fund dividend payments and interest on debt. Consequently the cash flows from financing activities result in a change in the size in the equity or borrowings of a business.
Undoubtedly the business plan financial section for most businesses tends to concentrate on the income statement and fails to get to grips with the cash flow forecast. For this reason our financial projections template always includes the cash flow forecast template.
Cash flow forecasting is important for many reasons:
As can be seen any number of people could be using your cash flow forecast to make decisions about your business. As a result it is important that you have an understanding of what information the cash flow forecast is providing and what that information is telling you.
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.
By Andy Marker | May 8, 2017
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A cash flow statement, also referred to as a statement of cash flows, shows the flow of funds to and from a business, organization, or individual. It is often prepared using the indirect method of accounting to calculate net cash flows. The statement is useful for analyzing business performance, making projections about future cash flows, influencing business planning, and informing important decisions. The term “cash” refers to both income and expenditures and may include investments and assets that you can easily convert to cash. By conducting a cash flow analysis, a business can evaluate its liquidity and solvency, compare performance among accounting periods, identify cash flow drivers to support growth, and plan ahead to maintain a positive cash position.
Below you’ll find a collection of easy-to-use Excel templates for accounting and cash flow management, all of which are fully customizable and can be downloaded for free.
Download Accounts Payable Template
Excel | Smartsheet
This accounts payable template tracks suppliers, order numbers, and amounts due to help you manage payments and due dates. Easily organize ordering stock or supplies from multiple vendors with this template for greater efficiency and fewer errors.
Download Accounts Receivable Template
Excel | Smartsheet
Don’t let balances owed to your business slip through the cracks. This template accounts receivable template lists customers, invoice tracking details, amounts due, and outstanding balances. Keeping track of these accounts can inform your collections process by helping you quickly identify which overdue payments have aged significantly.
Download Balance Sheet Template
A balance sheet provides a summary of financial health in a single, brief report. With this balance sheet template, you can assess the financial standing of a business by examining assets, liabilities, and equity. Business owners can use it to evaluate performance and communicate with investors.
Download Income Statement Template
Use this income statement template to assess profit and loss over a given time period. This template provides a clear outline of revenue and expenses along with net income figures. You can edit the template to match your needs by adding or removing detail, and create an income statement for a large or small business.
Download Simple Cash Flow Template
This template works for any length of time and allows you to compare different periods for a quick analysis of cash flows. It include sections for an itemized list of revenue and expenditures, automatic calculations of totals and net cash flows, and a simple layout for ease of use. You can modify the template by adding or removing sections to tailor it to your business.
Download 3-Year Cash Flow Statement Template
Use this statement of cash flows template to track and assess cash flows over a three-year period. The template is divided into sections for operations, investing, and financing activities. Simply enter the financial data for your business, and the template completes the calculations.
Download Monthly Cash Flow Template
This comprehensive template offers an annual overview as well as monthly worksheets. Create a detailed monthly cash flow report to analyze performance or plan for the future. Each month has a separate sheet so that you can get a thorough picture of cash inflows and outflows for both short- and long-term periods.
Download Daily Cash Flow Template
Add receipts and payments to this daily cash flow template to get a deep understanding of business performance. You can customize the list of cash inflows and outflows to match your company’s operations.
Download 12-Month Cash Flow Forecast
Use this template to create a cash flow forecast that allows you to compare projections with actual outcomes. This template is designed for easy planning, with a simple spreadsheet layout and alternating colors to highlight rows. You get a snapshot of cash flows over a 12-month period in a basic Excel template.
Download Quarterly Cash Flow Projections Template
Cash flow projection templates can cover a variety of time frames, including the quarterly format offered here. Quarterly projections are useful for new businesses and those wanting to align cash flow projections with upcoming goals and business activities. Use the template to create projections and then compare the variance between estimated and actual cash flows.
Download Cash Flow Analysis Template
You can use this template to perform a cash flow sensitivity analysis in order to anticipate shortfalls and help your business maintain a positive cash position. This analysis can help you make more accurate cash flow predictions and inform your business decisions.
Download Discounted Cash Flow Template
This template allows you to conduct a discounted cash flow analysis to help determine the value of a business or investment. Enter cash flow projections, select your discount rate, and the template calculates the present value estimates. This template is a useful tool for both investors and business owners.
Download Nonprofit Cash Flow Projection Template
This template is designed with nonprofit organizations in mind and includes some common income sources, such as donations and grants, as well as expenditures. The template covers a 12-month period and makes it easy to see annual and monthly carryover so that you can track a rolling cash balance. Create a detailed list of all receipts and disbursements that are relevant to your organization.
Download Personal Cash Flow Template
Individuals can manage their personal cash flow with this free template. The simple layout makes it easy to use and provides a financial overview at a glance. Keep track of how you are spending money to gain more control over your financial habits and outlook.
Download Trial Balance Worksheet
Use this trial balance template to check your credit and debit balances at the end of a given accounting period, and to support your financial statements. The template shows ending balances for specific accounts, as well as total amounts for the activity period and the overall difference. This is a simple worksheet that you can customize to reflect your business type and the products or services it offers.
To help you get started creating a cash flow statement or forecast, we’ve included a variety of customizable templates that you can download for free. Simply adjust your chosen template to fit your specific goals and the intended audience. Each template offers a clean, professional design and is intended to save you time, boost efficiency, and improve accuracy. Just enter your financial data, and the templates will perform automatic calculations for you to analyze. By combining your cash flow statement with a balance sheet, income statement, and other forms, you can manage cash flow and get a comprehensive understanding of business performance. Smartsheet offers additional Excel templates for financial management, including business budget templates .
A cash flow statement is typically divided into the following sections to distinguish among different categories of cash flow:
A statement of cash flows can summarize information for any accounting period, but if you’re starting a new business or planning for the months ahead, creating a cash flow projection can help you anticipate how much money your business will have coming in and going out during a future time frame.
Projecting future cash flows can give you greater financial control, provide a deeper understanding of a company’s performance, help identify shortfalls in advance, and support business planning so that activities and resources are properly aligned. New businesses trying to secure a loan may also require a cash flow forecast.
In order to set yourself up for success, it’s imperative to be realistic when forecasting cash flows. You can build your projections on a foundation of key assumptions about the monthly flow of cash to and from your business. For instance, knowing when your business will receive payments and when payments are due to outside vendors allows you to make more accurate assumptions about your final funds during an operating cycle. Estimated cash flows will always vary somewhat from actual performance, which is why it’s important to compare actual numbers to your projections on a monthly basis and update your cash flow forecast as necessary. It’s also wise to limit your forecast to a 12-month period for greater accuracy (and to save time). On a monthly basis, you can add another month to create a rolling, long-term projection.
A cash flow forecast may include the following sections:
Keep in mind that while many costs are recurring, you also need to consider one-time costs. Additionally, you should plan for seasonal changes that could impact business performance, and upcoming promotional events that may boost sales. Depending on the size and complexity of your business, you may want to delegate the responsibility of creating a cash flow forecast to an accountant. However, small businesses can save time and money with a simple cash flow projections template.
Using a template is essential to helping you get started managing your organization's financials quickly. But, creating and managing your cash flow statement may require multiple stakeholders to weigh in and make updates. That’s why it’s important to find a template with more advanced functionality like notifications and reminders and enhanced collaboration features to ensure everyone is kept in the loop. One such template is the cash flow statement template in Smartsheet.
A Smartsheet template can improve how your team tracks and reports on cash flow - use row hierarchy to sum line items automatically, checkboxes to track stakeholder approval, and attachments to store item details directly to the rows in your sheet. Easily create reports to roll up annual, quarterly, or monthly cash flow details so you’ll always have a real-time view of the financial health of your business.
See how easy it is to track and manage your cash flow statement with a template in Smartsheet.
Create a Cash Flow Statement in Smartsheet
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Updated on March 27, 2023
Table of contents, what is a cash flow statement (cfs).
A cash flow statement (CFS) is a financial statement that captures how much cash is generated and utilized by a company or business in a specific time period.
By looking at the cash flow statement, one can see whether the company has sufficient cash flowing in to pay its debts, fund its operations, and return money to shareholders via dividends or stock buybacks.
CFS bridges the income statement and balance sheet because it shows how money moves in and out of the business via three main channels: operating, investing, and financing activities.
It produces what is called the net cash flow by breaking down where the changes in the beginning and ending balances came from.
The cash flow statement is focused on the cash accounting method, which means that business transactions reflect in the financial statement when the cash flows into or out of the business or when actual payments are received or distributed.
The Cash Flow Statement has three main sections: cash flows from operating activities, investing activities, and financing activities.
Together, these different sections can help investors and analysts determine the value of a company as a whole. Let us learn more about them below.
This section covers cash transactions from all of a business’ operational activities, such as receipts from sales of goods and services, wage payments to employees, payments to suppliers, interest payments, and tax payments.
For an investment company or a trading portfolio, equity instruments or receipts for the sale of debt and loans are also included because it is counted as a business activity.
It can be considered as a cash version of the net income of a company since it starts with the net income or loss, then adds or subtracts from that amount to produce a net cash flow figure.
Items that are added or subtracted include accounts receivables, accounts payables, amortization, depreciation, and prepaid items recorded as revenue or expenses in the income statement because they are non-cash.
This section is the result of investment gains and losses. It includes cash spent on property, plant, and equipment. Analysts look in this section to see if there are any changes in capital expenditures (CapEx) .
Companies could generate cash flow from investing by selling equipment, property, or assets . Loans given to vendors or received from customers, as well as any payments associated with mergers and acquisitions (M&A) , are also included in this section.
Cash-out items are those changes caused by the purchase of new equipment, buildings, or marketable securities. Cash-in items are when a company divests an asset.
This section records the cash flow between the company, its shareholders, investors, and creditors. It provides an overview of cash utilized in business financing.
Transactions in CFF typically involve debt, equity , dividends , and stock repurchases.
Cash-out transactions in CFF happen when dividends are paid, while cash-in transactions occur when the capital is raised.
Thus, when a company issues a bond to the public, the company receives cash financing. In contrast, when interest is given to bondholders, the company decreases its cash.
There are two accepted methods in calculating cash flow: direct and indirect.
This method measures only the cash received, typically from customers, and the cash payments made, such as to suppliers. These inflows and outflows are then calculated to arrive at the net cash flow.
This method of calculating cash flow takes more time since you need to track payments and receipts for every cash transaction.
Figures used in this method are presented in a straightforward manner. They can be calculated using the beginning and ending balances of various asset and liability accounts and assessing their net decrease or increase.
Using this method, cash flow is calculated through modifying the net income by adding or subtracting differences that result from non-cash transactions. This is done in order to come up with an accurate cash inflow or outflow.
Instead of presenting transactional data like the direct method, the calculation begins with the net income figure found in the income statement of the company and makes adjustments to undo the impact of accruals that were made during the accounting period.
The major differences between the two methods are outlined in the table below:
To present a clearer picture of the two methods, there are some examples presented below.
An example of the cash flow statement using the direct method for a hypothetical company is shown here:
In the above example, the business has net cash of $50,049 from its operating activities and $11,821 from its investing activities. It has a net outflow of cash, which amounts to $7,648 from its financing activities.
As a result, the business has a total of $126,475 in net cash flow at the end of the year.
This is another example of a cash flow statement of Nike, Inc. using the indirect method for the fiscal year ending May 31, 2021.
This cash flow statement shows that Nike started the year with approximately $8.3 million in cash and equivalents.
The business brought in $6.65 million through its operating activities. Meanwhile, it spent approximately $3.8 million in investment activities, and a further $1.45 million in financing activities.
The changes in the value of cash balance due to fluctuations in foreign currency exchange rates amount to $143 million.
Consequently, the business ended the year with a positive cash flow of $1.5 million and total cash of $9.88 million.
The CFS is one of the most important financial statements for a business. Cash is the lifeblood of any organization, and a company needs to have a good handle on its cash inflows and outflows in order to stay afloat.
There are several reasons why the cash flow statement is so important:
The cash flow statement presents a good overview of the company’s spending because it captures all the cash that comes in and goes out.
This information is helpful so that management can make decisions on where to cut costs. It also helps investors and creditors assess the financial health of the company.
Another important function of the cash flow statement is that it helps a business maintain an optimum cash balance.
Management can use the information in the statement to decide when to invest or pay off debts because it shows how much cash is available at any given time.
The cash flow statement also encourages management to focus on generating cash.
This is because when a company knows where its cash is going, it can take steps to make sure that more cash is coming in than going out.
A cash flow statement is an important measurement because it provides information that can be used to make short-term plans.
For instance, if a company realizes that it will have a cash shortfall in the next month, it can take steps to ensure enough funds are available.
The Cash Flow Statement has a few limitations:
The cash flow statement is useful when analyzing changes in cash flow from one period to the next as it gives investors an idea of how the company is performing.
However, it does not measure the efficiency of the business in comparison to a similar industry. This is because terms of sales and purchases may differ from company to company.
Other companies may also have a higher capital investment which means they have more cash outflow rather than cash inflow.
The cash flow statement does not replace the income statement as it only focuses on changes in cash. In contrast, the income statement is important as it provides information about the profitability of a company.
The cash flow statement will not present the net income of a company for the accounting period as it does not include non-cash items which are considered by the income statement.
Therefore, it does not evaluate the profitability of a company as it does not consider all costs or revenues.
Three financial statements provide insights into the financial performance of a company and potential issues that may need to be addressed: the income statement, balance sheet , and cash flow statement.
These three documents offer unique information that serves as the foundation of corporate accounting.
Below is a comparison between cash flow statement, income statement, and balance sheet:
The cash flow statement is an essential financial statement for any business as it provides critical information regarding cash inflows and outflows of the company.
It helps businesses to make crucial decisions about spending, investments , and credit.
Cash flow statements display the beginning and ending cash balances over a specific time period and points out where the changes came from (i.e operating activities, investing activities, and financing activities).
This information allows businesses to forecast future cash needs, make informed investment decisions, and track actual performance against budgeted targets.
However, the cash flow statement also has a few limitations, such as its inability to compare similar industries and its lack of focus on profitability.
Therefore, it should always be used in unison with the income statement and balance sheet to get a complete financial overview of the company.
What are the implications of positive and negative cash flows.
Positive cash flow reveals that more cash is coming into the company than going out. This is a good sign as it tells that the company is able to pay off its debts and obligations. Negative cash flow typically shows that more cash is leaving the company than coming in, which can be a reason for concern as the company may not be able to meet its financial obligations in the future. However, this could also mean that a company is investing or expanding which requires it to spend some of its funds.
Direct cash flow statements show the actual cash inflows and outflows from each operating, investing, and financing activity. While the indirect cash flow method makes adjustments on net income to account for accrual transactions.
Cash flow statements are important as they provide critical information about the cash inflows and outflows of the company. This information is important in making crucial decisions about spending, investments, and credit.
The main components of a cash flow statement are cash flows from operating activities, investing activities, and financing activities.
Cash flow is the total amount of cash that is flowing in and out of the company. Free cash flow is the available cash after subtracting capital expenditures.
About the Author
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .
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Small Business Finance
6 min read
If you’re like many other business owners, the mere thought of managing your finances makes you want to bury your head in the sand. You may find yourself asking, “How can I create a cash plan? Wait—what is a cash plan?” And that’s a great place to start: What exactly is a cash plan? Think about it like this: If your business is a car, cash is the gas. And sometimes, despite our best efforts, the tank hits empty before the next gas station. In order to keep driving your business toward the future you envision, a cash plan ensures that you won’t stall out.
Before you begin, it’s key to understand the difference between profit and cash flow . In other words, the difference between your revenue and expenses as you’ve anticipated versus how they’re actually flowing . You may have already encountered a scenario in which your anticipated profit remains the same even while your current cash position decreases, or maybe your net profit decreases but your cash position increases—no matter the scenario, changes to cash surplus create an immediate impact. And though your business may run unprofitably for a period of time, it won’t run this way forever. In short, your cash plan is a budget for your cash. It’s a cash flow statement for the future, including forecasts of receipts and expected disbursements in the coming months.
In order to create a sustainable and flexible cash plan, there are some vital steps to put in place. Whether you’re working in tandem with an in-house accountant, a financial advisor or going it alone , here’s an overview that’ll help get you started:
The whole goal of this process is to control the financial activities in your business to maximize cash flow—and to do that, you need to set a review cadence. Begin by establishing your goals based on a period of time. When will you check in to review the cash flow cycle? Weekly, bi-weekly, monthly, quarterly—or some combination? If your business is in a particularly uncertain position, you may even want to begin with daily reviews. Choose a timeline that works for you and stick with it. Use it not only to see your cash standing today , but also to look back to previous time periods and to project your future cash position.
At the end of a cycle, generate your cash flow statement . With this, you’ll be able to review your cash position and make any adjustments you need based on the variance report. The critical formula of a cash flow statement is simple:
Cash Receipts - Cash Disbursements = Net Cash Flow
The result is a positive or negative net cash flow—that figure is your ending cash position for the cycle, as well as the beginning cash position for the next cycle’s report.
Once you have a statement set up, don’t just use it going forward. Assuming you haven’t yet created any cash flow statements, work with your accountant (or use your accounting software) to generate cash flow reports for previous cycles. Start with your beginning cash position for this cycle, then pull receipts and disbursement data from your bank account statements and your accounting software, and plug it into the columns for the previous month. Work backward until you produce cash flow statements for three, six or twelve of the previous months.
Remember, your cash plan is nothing more than a cash flow statement for the future, using forecasted rather than historical numbers. With that in mind, here’s another formula for you:
Projections + Predictions = Forecast
Projections are what you guess your likely sales figures will be based on previous years’ experience. Predictions , on the other hand, anticipate any possible changes in the future that could impact sales for better or worse—plans for marketing, new products or market expansion, for example.
As you forecast cash flow for future periods, you’ll need to anticipate cash receipts from your sales and from accounts receivable, and as well as other miscellaneous or occasional sources. I know, it can feel vague at first to “guess” at figures, but you’re basing this estimation on real numbers.
Cash from sales looks back to previous months in order to estimate an average, and take into account any upcoming factors that might affect this number. For example, say you have a seasonal business and revenue from one season vastly outweighs others. Or maybe you’re launching a highly anticipated new product or service. All of this matters.
Accounts receivable is a bit different. You likely know that your customers don't often pay you minute the minute they get the invoice (but wouldn’t that be nice?). Take a look at the history of your numbers with your accountant and calculate the average amount of time for collection of receivables. Ideally, you want to aim for 30 days or less. If it’s significantly slower than that, you may want to review your credit and collection policies.
Miscellaneous cash sources are things like interest gained, tax refunds, rental income, credit payments, etc. You should be able to predict these numbers fairly regularly and accurately. Don't worry much about predicting smaller, irregular receipts—just focus on major surprises. It’s okay to be conservative in your forecasts—having more cash than you predicted is never a bad thing! Just keep track of those numbers.
Review your cash flow on a regular basis so that you stay in the know on how things are flowing. If you end a cycle with net positive cash flow, great—you have a cash cushion for any unforeseen circumstances. And on the other end, knowing that your cash position is in the negative can help you plan ahead in other directions.
Comparing variance reports—which show the difference between your expected cash flow in and the actual income—will also paint a bigger picture of what’s going right or wrong in your business in that given period. Maybe your accounts receivable cash is lower than anticipated, so it’s time to check in with those customers or tighten up your policy. Or maybe, you see that numbers are way up in response to a new salesperson, and you know they’re the right fit for the job.
Keeping an eye on cash flow in real time is key to proactively managing budgets and staying on track with financial planning. But it’s also important to keep in mind that part of cash planning is to think about and create a cash reserve . In general, aim to determine your average monthly expenses, then build a reserve that’s 2-3 times that amount (or more depending on how big your company is). That way, your business can still run for a couple of months in case of an emergency or unforeseen circumstances. It may take several months to build that reserve up, but it's never too late to start now.
Feeling inspired to implement a cash flow system in your small business, but would like support to get started? We’re here to help.
Adam Traub is a senior member of the EMyth Coaching Team and an expert in the EMyth Approach. In his nearly 20 years with the company, his experience has included program development, coach training, customer satisfaction and success, and personally coaching hundreds of business owners through the joys and challenges of redesigning their businesses. Adam’s dedication to helping business owners and leaders comes from his own interest in culture and people dynamics, as well as personal experience working through the EMyth Program as a client, where he saw the possibility for all leaders to transform their companies, create a better culture, and achieve their vision.
A guide to debt restructuring for business financial stability.
Debt restructuring is a powerful strategy that businesses can use to regain financial stability and manage overwhelming debt. This process involves renegotiating the terms of existing debts to make them more manageable, often by extending repayment periods, reducing interest rates, or even forgiving a portion of the debt. Debt restructuring services for business financial stability can provide breathing room for businesses struggling with cash flow issues, allowing them to continue operations while working towards long-term financial health. When done effectively, it can be a lifeline for companies facing financial distress, helping them avoid more drastic measures like bankruptcy. Let’s explore the steps involved in debt restructuring and how it can contribute to business financial stability.
The first step in debt restructuring is to thoroughly evaluate your business’s financial position. This assessment forms the foundation for all subsequent decisions and negotiations.
Key areas to examine:
Benefits of a comprehensive assessment:
Use financial statements, cash flow reports, and profit and loss projections to build a clear picture of your business’s financial health. This information will be crucial in developing your restructuring plan.
With a clear understanding of your financial situation, the next step is to create a detailed restructuring plan. This plan outlines how you intend to address your debt issues and return to financial stability.
Elements of a restructuring plan:
Why a solid plan matters:
Be realistic in your planning and consider multiple scenarios. Your plan should be flexible enough to the adapt to changed circumstances.
Armed with your financial assessment and restructuring plan, it’s time to approach your creditors. The goal is to reach agreements that benefit both your business and the creditors.
Negotiation strategies:
Potential outcomes of negotiations:
Remember, creditors often prefer restructuring over the possibility of getting nothing if a business fails. Approach negotiations with a collaborative mindset.
Once agreements are reached with creditors, it’s time to put your restructuring plan into action. This phase requires careful management or attention to the detail.
Key implementation steps:
Why effective implementation is crucial:
Stay focused on both short-term debt management and long-term financial stability during this phase.
Debt restructuring is not an one-time event but an ongoing process. Continuous monitoring or adjustment are essential for the long-term success.
Areas to monitor:
Benefits of ongoing monitoring:
Be prepared to make changes to your restructuring plan if circumstances change. Flexibility and adaptability are key to achieving and maintaining financial stability.
Debt restructuring can be a complex process, but when done effectively, it can provide a path to financial recovery and stability for struggling businesses. By thoroughly assessing your financial situation, developing a solid restructuring plan, negotiating effectively with creditors, implementing the plan diligently, and continuously monitoring and adjusting your approach, you can navigate through financial challenges and set your business on a course for long-term success .
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Eliza Haverstock is NerdWallet's higher education writer, where she covers all aspects of college affordability and student loans. Previously, she reported on billionaires and investing for Forbes in New York, and she also covered private markets for PitchBook in Seattle. Eliza got started at her college newspaper at the University of Virginia and interned for Bloomberg, where she spent a summer writing a feature story about plastic straws. She is based in Washington, D.C.
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Federal student loan interest rates for 2024-25 are now live. Some have reached record highs, increasing the cost of college for people who will take out student loans for the upcoming school year.
Here’s how the current 2024-25 federal student loan interest rates compare to 2023-24 rates:
Direct subsidized and unsubsidized loans for undergraduate students: 6.53% interest rate for 2024-25, up from 5.50%.
Direct unsubsidized loans for graduate students : 8.08% interest rate for 2024-25, up from 7.05%
PLUS loans, available to parents and grad students to fill in funding gaps: 9.08% interest rate for 2024-25, up from 8.05%.
Since 2006, all federal student loans have had fixed interest rates. Undergraduate direct loan interest rates haven’t been this high in 16 years, since the 2008-09 academic year. (The standing record is 6.8%, for loans disbursed between 2006 and 2008.) Interest rates on direct graduate loans and PLUS loans have never been this high.
The latest federal interest rate hikes come on the heels of major FAFSA errors , which impacted and delayed financial aid offers, including federal loan eligibility, for millions of students. For some families, private student loans with lower interest rates may look more attractive this year — but private loans come with fewer borrower protections and no forgiveness options.
Each spring, the government sets federal student loan interest rates for the academic year ahead. The rates are effective from July 1, 2024 to June 30, 2025, and they apply to all borrowers who take out new federal student loans for the 2024-25 school year. Federal student loans have fixed interest rates, so they won’t change during the repayment period — which typically lasts from 10 to 25 years, depending on your repayment plan. (If you’re already repaying older student loans, this interest rate hike doesn’t affect you.)
Ultimately, higher interest rates will make college more expensive for the millions of college students and their families who take out loans. Today, 42.8 million people collectively owe $1.62 trillion in outstanding federal student loans, per Department of Education data.
That tally may grow in the coming years: A 2024 high school graduate heading to college this fall could amass about $37,000 in student loan debt while pursuing their bachelor’s degree, according to a recent NerdWallet analysis . Dependent undergraduate students can take out no more than $31,000 in federal loans, so more students may turn to private loans to fill the gaps.
Here’s an example of how the higher interest rates can hit your wallet: If you start college in the fall and borrow $31,000 worth of unsubsidized federal direct loans over the course of your undergraduate education, with a 6.53% interest rate, you’ll wind up paying back about $42,315 under a standard 10-year repayment plan. If you’d started college in 2020-21 and taken out the same $31,000 in unsubsidized federal loans with a record-low 2.75% interest rate, you’d have had to repay around $35,510 over 10 years — a $6,805 difference.
In practice, you could pay even more. You can’t borrow the full $31,000 at once — the capped amount is split up over the years you’re in school. If you'll be a college freshman in the fall, interest rates could increase in the three (or more) years to follow.
Run the numbers with a student loan calculator to see how much your debt may cost over time.
In recent years, federal student loans have offered lower interest rates than private alternatives — but that may no longer be true for some borrowers. Currently, private student loans for undergraduates have interest rates from 3.85% to 15.9%, according to a May 2024 NerdWallet analysis.
“More than ever, we are really encouraging our families to be good consumers,” says Stacey MacPhetres, senior director of education finance at EdAssist by Bright Horizons.
Shop around for private student loans and compare interest rates like you would for a mortgage, MacPhetres adds.
To qualify for the lowest rates on private student loans, borrowers must have a high credit score. Many students will need a parent or co-signer with excellent credit to co-sign the loan and accept equal legal responsibility for repaying it.
Federal student loans don’t allow co-signers, and only federal PLUS loans require a credit check. Other federal student loan borrower protections not typically offered by private lenders include:
Repayment plans that cap monthly bills at a certain percentage of your income, such as the new SAVE repayment plan .
Extended payment pauses, like a student loan deferment or forbearance , for financial hardships. (Private loan forbearances are generally shorter and more difficult to qualify for.)
Loan forgiveness programs, like Public Service Loan Forgiveness (PSLF).
Loan discharges for borrowers whose school closed or defrauded them.
As a general guideline, borrowers should prioritize federal student loans. If they still have remaining costs, private student loans are a good option to fill in the gaps.
But when it comes to PLUS loans, private alternatives may be a better choice this year if you can qualify for a lower interest rate. PLUS loans don’t offer the same robust protections and flexible repayment options as other types of federal student loans, and they have a 4.228% origination fee that most private lenders don’t require.
Evaluate your family’s capacity to pay out of pocket or consider using some savings or investments to cover education bills this year, MacPhetres says. “We’re really trying to encourage everybody to exhaust all of their other options before borrowing at all, which includes federal student loans.”
You can also minimize your total college debt and interest payments by leaning on funding sources you won’t have to repay, like scholarships, grants and work-study. You must submit the FAFSA for each year you’ll be in school to qualify for most grants and work-study. That includes the federal need-based Pell Grant , which can give you up to $7,395 per year in free money to pay for college. Many scholarships require applicants to submit the FAFSA. You also need to submit the form to be eligible for federal student loans.
The Free Application for Federal Student Aid is open until June 30, 2025, for the 2024-25 school year, but you should fill it out as soon as possible to increase your chances of getting more money — some types of aid draw from limited pools and can run out.
Another strategy to reduce borrowing: See where you or your child can trim college costs in the first place.
“Your student doesn't have to live in the best residence facility right now ... or maybe they don't need the 21-meal plan if they have never eaten breakfast in their lives,” MacPhetres says. “Little things that you might not think would have a significant impact can certainly help in trying to reduce your overall spending.”
On a similar note...
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A good cash flow forecast might be the most important single piece of a business plan. All the strategy, tactics, and ongoing business activities mean nothing if there isn't enough money to pay the bills. That's what a cash flow forecast is about—predicting your money needs in advance. By cash, we mean money you can spend.
Cash flow measures how much money moves into and out of your business during a specific period. Businesses bring in money through sales, returns on investments, and loans and investments—that's cash flowing into the business. And businesses spend money on supplies and services, utilities, taxes, loan payments, and other bills—that's ...
1. Set up a cash flow projection. First, you need to understand your current cash flow situation and develop a projection for the next few months. You can do this by reviewing your previous ...
Managing cash flow is a critical aspect of running a successful business. It can be the determining factor between flourishing and filing for Chapter 11 bankruptcy.. In fact, studies reveal that 30% of business failures stem from running out of money. To avoid such a fate, by understanding and predicting the inflow and outflow of cash, businesses can make informed decisions, plan effectively ...
Cash flow for the month. At the bottom of our cash flow statement, we see our total cash flow for the month: $42,500. Even though our net income listed at the top of the cash flow statement (and taken from our income statement) was $60,000, we only received $42,500. That's $42,500 we can spend right now, if need be.
By including a cash flow statement in your business plan, you demonstrate your ability to manage your company's finances effectively. Example: The cash flow statement for EcoTech's first year of operation is as follows: Operating Activities: Net Income: $250,000; Depreciation: $10,000; Changes in Working Capital: -$50,000
1. Determine the Starting Balance. The first step in preparing a cash flow statement is determining the starting balance of cash and cash equivalents at the beginning of the reporting period. This value can be found on the income statement of the same accounting period. The starting cash balance is necessary when leveraging the indirect method ...
Cash forecasting can help you predict the months in which you're likely to experience a cash deficit and make necessary changes, like changing your pricing or adjusting your business plan. It decreases the impact of cash shortages. When you can predict months in which you might experience a cash shortage, you can take steps to plan for them.
Calculating your cash flow projection can seem intimidating at first, but once you start pulling together the necessary information, it isn't so scary. Let's walk through the first steps together. 1. Gather your documents. This includes data about your business's income and expenses. 2. Find your opening balance.
Example of a cashflow. As well as your business plan, a set of financial statements detailing you cashflow is essential. This will provide details of actual cash required by your business on a day-to-day, month-to-month and year-to-year basis. The needs of a business constantly change and your cashflow will highlight any shortfalls in cash that ...
Or you can follow the four steps below to build your own cash flow forecast. 1. Decide how far out you want to plan for. Cash flow planning can cover anything from a few weeks to many months. Plan as far ahead as you can accurately predict. If you're well-established, you might have a predictable sales pipeline and data from previous years.
Cash flow is the net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing, enabling it to settle debts ...
This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business. . Download Startup Financial Projections Template.
10 steps to start your business; Plan your business. Market research and competitive analysis; Write your business plan; Calculate your startup costs; Establish business credit ... cash flow statements, and capital expenditure budgets. For the first year, be even more specific and use quarterly — or even monthly — projections. Make sure to ...
Step 1: Select a timeline. The first step in creating a cash flow plan is to decide on a timeline. You can create a cash flow plan for a month or a quarter, but a good rule of thumb for most small businesses is to plan for the next 12 months. This provides a reasonable long-term picture of your finances while remaining within a manageable ...
Cash flow planning refers to the process of creating a detailed budget and holistic financial plan to manage income, expenses, and savings. It involves analyzing cash inflows and outflows, identifying areas of overspending, and creating a plan to improve financial stability. The purpose of cash flow planning is to help individuals, families ...
A cash flow projection provides an estimate of how much cash is expected to flow in and out of your business within a specified time period. This statement includes expected sales figures and any flow of money, namely loans or equity funding received, and expenses forecasted within the timeframe—which includes operating expenditures, and ...
A cash flow plan shows the current and future cash position of a company. It shows the expected cash flows on a monthly, weekly or even daily basis. The cash flows represent all income and expenses of the company that are related to its operating activities. To create a cash flow plan, you need to have insight into all the business accounts of ...
The cash flow forecast is one of the three main accounting statements for business plan financials. The cash flow forecast shows what cash was paid or received by the business during the accounting period. The accounting period can be any length but is usually a month or a year. There are many cash flow forecast forms, the layout below acts as ...
The statement is useful for analyzing business performance, making projections about future cash flows, influencing business planning, and informing important decisions. ... and plan ahead to maintain a positive cash position. Below you'll find a collection of easy-to-use Excel templates for accounting and cash flow management, all of which ...
An example of the cash flow statement using the direct method for a hypothetical company is shown here: In the above example, the business has net cash of $50,049 from its operating activities and $11,821 from its investing activities. It has a net outflow of cash, which amounts to $7,648 from its financing activities.
4. Negotiate with your vendors and customers. Negotiation can be a powerful tool when it comes to maintaining healthy business cash flow. You can negotiate both your accounts receivable with ...
2. Produce a cash flow statement. At the end of a cycle, generate your cash flow statement. With this, you'll be able to review your cash position and make any adjustments you need based on the variance report. The critical formula of a cash flow statement is simple: Cash Receipts - Cash Disbursements = Net Cash Flow.
A cash flow plan is a financial planning and forecasting tool that helps organizations track potential income, allocate the budget properly and plan for changes in income or expenses. If you're interested in the finance industry, you can benefit from learning more about a cash flow plan. In this article, we define cash flow plans, explain what ...
Operating cash flow vs. free cash flow. OCF is cash generated by business operations, whereas free cash flow is the cash an organization brings in from business operations after subtracting capital expenditures. Operating cash flow vs. EBIT vs. EBITDA. EBIT is an organization's net income before taxes and interest are subtracted.
Free cash flow = operating cash flow - capital expenditures. Think of free cash flow as the money a business makes from operations after investing in fixed assets. Free cash flow helps assess your ability to repay debt or pay dividends. 3. Set cash flow goals. Now that you know the major issues, you can address them a bit easier.
Develop a Restructuring Plan. With a clear understanding of your financial situation, the next step is to create a detailed restructuring plan. This plan outlines how you intend to address your debt issues and return to financial stability. Elements of a restructuring plan: Proposed new terms for each debt; Cash flow projections under of the ...
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Some interest rates for new federal student loans have hit record highs for 2024-25: 6.53% for undergraduate direct loans, 8.08% for graduate and professional direct loans, and 9.08% for PLUS loans.