The short answer
Closing cash = opening cash + money received − money paid. Record when cash actually moves: an invoice or a profitable sale does not mean the money is already in your account.
Cash flow and profit answer different questions
Cash flow asks whether money is available when you need to pay. Profit asks how revenue compares with expenses under the accounting basis you use. A customer can owe money on a completed sale while your bank balance remains low. A loan can increase your bank balance without being sales revenue. Keep those distinctions visible in your records.
The Australian government’s business guidance describes a cash-flow statement as money coming in and going out. We use that basic arithmetic here with an original Indian-rupee example. This lesson is a planning worksheet, not a statutory cash-flow statement or advice on Indian reporting rules.
Follow the money through three weeks
A small workshop begins with ₹20,000. During week 1, it receives ₹10,000 and pays ₹15,000, leaving ₹15,000. In week 2, a customer settles an earlier invoice: receipts total ₹30,000 and payments are ₹10,000. Week 3 has only ₹4,000 of receipts against ₹18,000 of payments. These invented figures show timing, not a typical business result.
| Week | Opening | Received | Paid | Closing |
|---|---|---|---|---|
| 1 | ₹20,000 | ₹10,000 | ₹15,000 | ₹15,000 |
| 2 | ₹15,000 | ₹30,000 | ₹10,000 | ₹35,000 |
| 3 | ₹35,000 | ₹4,000 | ₹18,000 | ₹21,000 |
Each closing balance becomes the next opening balance. Now move the entire ₹30,000 week-2 receipt to week 4 and keep all other figures unchanged. Week 2 closes at ₹15,000 + ₹0 − ₹10,000 = ₹5,000. Week 3 then becomes ₹5,000 + ₹4,000 − ₹18,000 = −₹9,000. The negative forecast identifies a ₹9,000 shortfall before week 3 ends; it does not mean the bank automatically supplies that money. The business must arrange the missing funds or agree changes to payment timing before the bills fall due. An expected later payment cannot settle an earlier bill by itself.
Keep a simple transaction and due-date record
For each expected receipt or payment, note the date, amount, purpose, who is responsible and whether it is confirmed or estimated. Keep a separate list of customer invoices awaiting payment and supplier bills that are due. Match actual movements to the relevant bank record or receipt. Avoid counting the same payment twice when money moves between your own accounts.
Start with a format you can maintain every week. A spreadsheet can be enough for a planning exercise, but professional bookkeeping and legal reporting may require more. Keep personal withdrawals and owner contributions identifiable so they do not silently distort your picture of customer demand.
What to do when the forecast shows a gap
First check the entries and timing. Then consider practical changes: follow up an overdue invoice, agree a clearer payment schedule, reduce unnecessary stock or phase a purchase. Discuss changes with the other party before assuming a bill can be delayed. Borrowing is a separate decision involving costs and repayment; it is not a correction to an inaccurate forecast.
Check your understanding
Opening cash is ₹20,000, receipts ₹10,000 and payments ₹15,000. What is closing cash?
₹15,000. The calculation is ₹20,000 + ₹10,000 − ₹15,000. An unpaid invoice is not included in receipts until the money arrives.
Is money from a loan the same as revenue?
No. Borrowing increases cash and creates repayment obligations. Keep funding separate from customer receipts when reviewing the business.
Sources & further reading
Updated 20 September 2026. Open the issuing authority’s page for current rules, fees and course availability. Examples and worksheets are PLS Foundation learning exercises; legal and financial decisions may need qualified advice for your circumstances.