Preparing and Utilizing an Effective
Cash Flow Statement

While an income statement can present a true picture of the operating results of your business, understanding what is happening with your cash flow is also critical and can help you with day-to-day operations. You need to have adequate cash flow to meet your operating needs and take advantage of marketplace opportunities as they arise.

Benefits of an Effective Cash Flow Statement

  • You will better understand the day-to-day financial dynamics of your business.
  • You will better understand the long-term financial dynamics of your business.
  • You can anticipate upcoming needs.
  • Preparing one will probably help you identify some ways to improve your cash flow.
  • Your lender will probably require one.
  • You can have some peace of mind.

Preparing a Cash Flow Statement

Most businesses prepare cash flow statements at least annually, and many prepare one each quarter. Here is a format that you may find helpful. You may want to start with one for the prior year (to become familiar with the process) and then begin making quarterly projections of your cash flow.

Cash Flow Statement

After you have prepared this statement or one similar to it, you can then focus on each of the line items and begin the process of improving them as you deem appropriate.

 

Cash Flow Chart