For banks and creditors, your cash flow statement provides some reassurance that your small business is able to pay back its loans or fund its own operating expenses. Financing activities in a cash flow statement refer to transactions that create funding for your small business. When a company raises money from investors, borrows funds, or pays down a loan, those cash transactions are classified as financing activities. Download QuickBooks’ cash flow statement template no matter what type of business you have. Our cash flow statement template can be customised to include the specific types of cash flow activities that apply to your company.

Bookkeeping and accounting software

1. If your company can produce cash inflows over the long-term, you can pay for capital expenditures in the future and repay loan balances.
2. Well-managed companies plan for capital expenditures, which may include investments in machinery, equipment, and other long-term assets.
3. As you’ll read later, we’ve found that most business owners (and normal humans for that matter) think of cash along the lines of starting balance, money earned, money spent, and ending balance.

Net Income is the bottom line of the P&L, calculated by subtracting all expenses (including taxes) from total income. These are useful for general financial analysis and for planning with your bookkeeper, tax preparer or business consultant. Our partners cannot pay us to guarantee favorable reviews of their products or services. If the restaurant can generate more cash from operations than is needed to pay for capital expenditures, the company has some options.

How to calculate cash flow

To view a sample cash flow statement, read our article Cash Flow for Small Business. Balance sheets are useful for accountants to see your financial health and for banks when you are applying for loans. It’s also essential for the small business owner to get a true sense of how their business is doing.

Get your free Excel cash flow statement template

In this example, the cash flow statement is prepared using the direct method, which reports the actual cash inflows and outflows from operating activities. Inflow from operating activities includes revenue from selling products and/or services, interest and dividends that the business receives, and other bond in accounting cash receipts. Before a forward-looking view of anticipated inflows and outflows can be achieved, it’s important to look back.

Statement of cash flows template

Financial statements — such as a profit and loss statement, balance sheet or statement of cash flows — are a window into the health of your business and help you spot problems and opportunities. Your company may have enough why is accounting important for startups revenue to appear profitable, but slow collections of invoiced sales can impede your ability to meet your current financial obligations. In most small businesses, revenue doesn’t always match up with spending, so understanding your cash flow is critical. The cash flow statement—also known as a statement of cash flows—helps you evaluate whether there is enough money coming in, and enough cash on hand, to pay your bills.

Continue reading to learn how to calculate cash flow in five simple steps, and download a handy cash flow template. Liquidity refers to your business’s ability to generate enough current assets to pay current liabilities. If your company can produce cash inflows over the long-term, you can pay for capital expenditures in the future and repay loan balances. Alternatively, you can easily create a cash flow statement based on an accounting system such as QuickBooks. A cash flow statement is used to attract new investments, inform your fundraising efforts, and get more access to financing options.

The Statement of Cash Flow summarizes the business’s actual cash flow activity over a specific period (eg. a month or a quarter). The format is pretty standard, and it’s how do internet companies profit if they give away their services for free considered one of the “big 3” accounting reports along with the Income Statement and Balance Sheet. Since cash flow statements are widely used among small businesses, it’s a good idea to keep the format consistent.

Use a self-created spreadsheet or download our excel cash flow template to organise your data into a cash flow statement. Essentially, your entries show cash in and cash paid out each month for the time period that your cash flow statement covers. After you calculate your operating activities, investing activities, and financing activities, use this template to calculate your statement of cash flows for this reporting period.

We’ve created an Excel cash flow statement template that you can start using today. It includes an example cash flow statement that you can use to make sure you fill it out correctly. A statement of cash flows can break down your inflows and outflows every month or year to help you better understand your business’s spending habits.