Cash Flow and Funds Statement
Standard Cash Flow Statement
Furniture Cash Flow Statement
Direct Cash Flow Statement
What Is Cash Flow?
Before we go to cash flow statements, let us first briefly describe what cash flow is. As the name suggests, cash flow is basically how cash flows in and out of your business or personal accounts. You may check out some statement samples and templates.
Cash inflows come mainly from the those who buy the products and services offered by a business while cash outflows come from the expenses of the business such as the rent, mortgage, bills, loans, taxes, and other accounts payable. You may also like a statement of cash flows.
Cash flow is easy to analyze. Look at it this way: if more cash is coming in your business compared to the amount of cash going out, this means that you have a positive cash flow. However, should it be the other way around, this means that you are financially not in a good position and you have to make a strategy that would help you to cover any deficits brought by the negative cash flow. Should your business be experiencing the latter, the common solution for this is applying for bank loans or applying for an extension in the credit line.
What Is Reported in a Cash Flow Statement?
As discussed earlier, your cash flow statement will be the financial statement that would show the changes with the flows of cash and cash equivalents of your company. It will give a brief information about how the cash comes in, how the cash goes out of your business, as well as if your company will be in debt, the sales, repurchases, and other cash factors that would affect the business’s liquidity.
Statements of cash flow are also used to assess if the company can meet obligations such as service loans, see why there are differences between the cash inflow and outflow, as well as how the differences and effects of the finances will affect the transactions for the specified time period.
Basically, there are three categories where cash flows in a business come from:
1. Operating Activities. The operating activities of a business are the core functions that help the business derive income. These would include manufacturing, selling, marketing, and distributing. In this part of the cash flow, you will typically find the terms inventory, wages payable, income taxes payable, and of course, accounts payable and accounts receivable. The cash flow from these activities, however, do not include inventory costs and long-term capital investments. You may also like sample statements.
2. Investing Activities. From the term investing, this means that it involves acquiring or purchasing items such as equipment for manufacturing items or buying types of furniture for the office like desks and office chairs. Company vehicles and real estate property will also be included under long-term assets. You may also see statement templates.
3. Financing Activities. These activities refer to how equity and borrowings of the company are done. This would include loans and short-term or long-term borrowings. Notes payable, retained earnings, and dividend payments are the terms that you would usually find in this part of the financial statements. You may also like sample personal statements.
Why Is a Cash Flow Statement Important?
A cash flow statement is important in a lot of aspects. By now, you have probably realized that this document plays a vital role in helping you analyze what the current financial status of your business is. It also helps you make applications for loans and credit line extensions way easier especially if your cash flow looks healthy. You may also like sample cash flow statement.
If your cash flow is not looking that great, you will also be able to think of better solutions to make your finances be in top-notch form. This way, you will be able to properly cope with any deficit and be able to cover these deficits. You may also like free sample statements.
Wanna know more reasons why cash flow is deemed to be important? Check out the following reasons:
- You can easily monitor whether or not your business will be in debt and develop marketing strategies that will help you prevent it.
- You can ensure that you are not going over your budget and that you are not making any unnecessary expenditures.
- You will know whether or not it is time to make more investments and how much you can allocate for each investment. You may also like business statement templates.
- You can make sure you have enough cash to pay your debts and loans.
- You can make sure that you have a steady amount of income by coming up with effective and efficient strategies.
Cash management for businesses as well as personal cash management is a challenging task and is definitely a struggle especially if you are just starting out. Cash flows may not be the only means of monitoring your finances but since it is easy to understand, it will be easier for you to do the monitoring task especially if you are new with business financial statements and even personal financial statements.
Cash Flow Statement Sheet
Sample Monthly Cash Flow Statement
Sample Blank Cash Flow Statement
Cash Flow Statement Example
Accounting Cash Flow Statement Sample
Simple Cash Flow Statement Format
Sample Projected Cash Flow Statement
Sample Cash Flow Statement
What You Need to Know about Cash Flow Statements
Cash or cash equivalents will always be vital in business. However, despite the fact that it is one of the most important resources of a business, it is still frequently misunderstood. So here are a few things that we would like to share with you regarding what you need to know about cash flow statements. You may also see sample statements.
1. Make Sure There Is Cash in Your Account
You have to make sure that you are able to allocate some cash to your bank accounts. Profit and cash are different. Profits are what you keep while cash is what you use to spend for the expenses you will have in your company. Your profits should never be tied up with the account you have for cash that you will use for expenditures. Remember, just because you are profitable, it does not necessarily guarantee cash. You may also like sample personal statements.
2. Waiting for Payments
There are times when businesses would need to wait to get paid especially for businesses that sell to other business. In these cases, it is usually a product first-pay later situation. It will be booked in the financial statement forms as a sale but it is not yet equivalent to cash unless it has been paid already. This is what is considered as accounts receivable. When businesses have an excess of accounts receivable and not enough cash in their bank accounts, this is where businesses tend to go under. Again, being profitable will not prevent your business from failing.
3. Buying Materials/Products Ahead
When businesses stock up on their inventory, it has a tendency to create cash flow problems as not all that has been bought ahead will be disposed of until the next scheduled repurchase of inventory. Profits for inventory will only reflect once the sale has been made. This is why inventory management is of high importance to ensure that inventories that have been stocked up for a long time will be disposed of in an expedited manner.
Want to know more about financial statements? Check out Things You Need to Know about Financial Statements.