Cash Flow Diagram How To Build Guide For Any Startup 2023

Creating a cash flow diagram for your business is a simple way to visualize the inflows and outflows of cash transactions.

Organizing your startup’s inflows and outflows over time using a cash flow diagram gives you the framework to ensure you have enough cash flow to maintain enough cash in your business bank accounts. 

Contents

  1. What are cash flow diagrams?
  2. How to create cash flow diagrams using pen and paper
  3. How to create cash flow diagrams using Excel
  4. How to create cash flow diagrams using Google Sheets

What are cash flow diagrams?

Cash flow diagrams are a way to visualize cash flow over a specified period of time. 

Read our detailed post on cash flow diagrams here

How to create cash flow diagrams

Now that you know the basics, let’s create a cash flow diagram. 

Every cash flow diagram has three main components: 

  1. time interval 
  2. cash inflows
  3. cash outflows

If you need help getting this information organized, check out this article.

Cash Flow Diagram Using “Pen & Paper” Method

First, draw the outline of your diagram.

t-shaped timeline outline

Next, mark your time intervals on the line and label them. Keep plenty of space in between to make notes on inflows and outflows.

timeline outline with columns for each time period

Starting with inflows, draw a small arrow pointing up on the horizontal line. Write the name of the inflow and the amount of the inflow at the estimated time interval above the horizontal line. 

cash flow time periods with inflows labeled

Next, with outflows, draw a small arrow point down on the horizontal line. Write the name of the inflow and the amount of the inflow at the estimated time interval above the horizontal line. 

cash flow time period with outflows added

Draw a horizontal line across the bottom of your diagram and calculate the cash flow for each period. To calculate net cash flow, subtract the outflows from the cash inflows for each period.

cash flow diagram with net cash flow calculation at bottom

Cumulative cash flow calculations are optional, but very helpful when analyzing the overall cash flow for a specific period.

To include cumulative cash flow in your diagram,  draw one more horizontal line under the net cash flow line. To calculate, add together each period’s cash flow from left to right – be sure to subtract any negative net cash flow (see T3 from the example above).

cash flow diagram with cumulative cash flow calculation added under net cash flow total

Congrats! You have made your first cash flow diagram!

If the pen-and-paper method isn’t efficient or your hand is already cramping, it might be worth checking out the methods below.

How to create in Microsoft Excel

To create cash flow diagrams in Excel, we’ll be using a simple table and chart.

First, open up a new Excel spreadsheet.

blank Microsoft Excel sheet

Starting in cells A1 through C1, label your columns with the following column headers: time period, cash flow activity, and amount.

Microsoft Excel sheet with cash flow diagram column labels

Starting in cell A2, list out all the time periods, cash flow activity, and amounts in the corresponding columns. Be sure to input the cash flow activities in the order you expect them to happen. (Note: all outflows need to be shown as negative numbers).

Microsoft Excel with data for cash flow diagram

Next, select the table of data.

cash flow diagram table selected in Microsoft Excel

Go to the Ribbon at the top of the screen, choose “Insert” and within the Charts section, select Recommended Charts. 

Microsoft Excel showing menu item for choosing Reccomended Charts

You will see multiple chart options to visualize your cash flow diagram. Depending on your preference, you might want to select:

  • Clustered Column, or
  • Waterfall 

Clustered Column – best for visualizing the net cash flows for each period.

Microsoft Excel Clustered Column chart example

Waterfall – best for visualization to inflow and outflows movements of each cash flow activity.

Microsoft Excel Waterfall chart example

There are many ways to visualize cash flows inside Excel that require different methods of formatting the table of data. What we’ve covered above is the easiest and fastest way to create a cash flow diagram inside Excel. 

How to create in Google Sheets

To create cash flow diagrams in Google Sheets, the process is very similar, but since it’s a different tool, there are some slight differences.

First, open up a new Google Sheet.

Google sheets blank sheet

Starting in cells A1 through C1, label your columns with the following column headers: time period, cash flow activity, and amount.

Google Sheet with cash flow diagram column labels

Starting in cell A2, list out all the time periods, cash flow activity, and amounts in the corresponding columns. Be sure to input the cash flow activities in the order you expect them to happen. (Note: all outflows need to be shown as negative numbers).

Google Sheet with data for cash flow diagram

Next, select the table of data.

cash flow diagram table selected in Google Sheets

Go to the Menu bar at the top of the screen, choose Insert, and then choose Chart.

Microsoft Excel showing menu item for choosing Charts

By default, Google Sheets chooses a chart based on your data. In this case, it chose a Column Chart.

Google Sheet Column chart example

If this works for you, great! If you would like to see the other chart options, select a different Chart Type in the Chart Editor towards the right-hand side of the screen. 

Google Sheet chart editor

In the case of this example, the Waterfall chart under the Other section of charts looks the best. 

Google Sheet option for Waterfall chart

Here is what the Waterfall chart option looks like with this sample data.

Google Sheet waterfall chart example

Similar to Excel, there are many ways to visualize cash flows inside of Google Sheets, as well as ways to format your chart to meet your preferences. What we’ve covered above is the easiest and fastest way to create a cash flow diagram inside Google Sheets. 

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Clarity Cash Flow

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Clarity Cash Flow is an online resources with a mission to provide business operations with the best cash forecasting and treasury management information available on the internet.

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