What is it and why do I need one?
There are a number of financial statements which will help you keep your business on track: a balance sheet, a profit and loss statement and a cash flow statement.
A cash flow statement is critical to ensuring a healthy business, as cash is what keeps your business afloat and functioning. It can be used to help you monitor your operations and growth. It is also an important measurement tool for investors and lenders outside your company, as it shows how solvent your company is from statement to statement, which proves that your business would be liquid enough to support its own debt and processes.
A cash flow statement, in very simple terms, records actual movements of cash in an accounting period, so that’s all the cash coming into the company (inflows), and going out of the company (outflows).
What will it cover?
A cash flow statement will typically cover:
- Cash flow from operating activities (money from sales, or asset sales)
- Returns on investments and servicing of finance
- Capital expenditure and financial investments
- Acquisitions and disposals
- Equity dividends paid
- Management of liquid resources
For help on creating your own cash flow statement, call Brilliant at Bookkeeping on 01327 811164.