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Cash Flow Statement

Your business’s cash flow is a measure of the money that’s coming into and going out of your business. The cash flow statement divides your cash flows into three sections: operating, investing and financing. Within each section, you’ll find:

  • Cash inflows, which are the money coming into your business, such as income from sales, loans and investments.
  • Cash outflows, which are the money leaving your business, such as money spent on supplies, loans and staff.

Cash Flow Statement

You can use the cash flow formula to figure out how much cash you’ll have at a certain point in the future (or had at a point in the past):

  • Cash balance = beginning cash balance + cash inflows – cash outflows

Cash balance is how much money the business currently has available. The beginning cash balance is how much cash was available at the start of the period you chose for your cash flow statement.

Using a cash flow statement and the equation can be useful when you want to make sure you’ll have enough money to pay for a future expense, such as next month’s payroll or opening a new location next year.

For example, you may use a cash flow statement to see how much cash you’ll have at the beginning of next month compared to the beginning of this month.

Say you start with $1,000. During the month, you spend $1,500 on expenses, sell $300 worth of products for cash and make another sale for $1,200, but the buyer won’t pay you for two months.

At the beginning of the next month, if you use the accrual accounting method, your balance sheet might show your business’s overall value is still $1,000, which comes from the initial $1,000 - $1,500 (expenses) + $300 (sales) + $1,200 (accounts receivable).

However, the cash flow statement will show that your account might be overdrawn and you’ll have a -$200 balance unless you increase your cash sales or decrease your expenses during the month.

Managing your business’s cash flow can be vital to making sure you have enough money to pay your bills and invest in opportunities. Cash flow statements can help you do this when your finances become too complicated to track in your head.

You can use the template to create your own cash flow statement.

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