{"id":14147,"date":"2020-01-13T06:42:33","date_gmt":"2020-01-13T05:42:33","guid":{"rendered":"https:\/\/www.invoiceberry.com\/blog\/?p=14147"},"modified":"2020-01-13T03:24:37","modified_gmt":"2020-01-13T02:24:37","slug":"all-about-cash-flow-statements","status":"publish","type":"post","link":"https:\/\/www.invoiceberry.com\/blog\/all-about-cash-flow-statements\/","title":{"rendered":"Cash Flow Statements And Then Some"},"content":{"rendered":"\n

A cash flow statement is a key financial document used to report the cash generated and spent during a specific period. It\u2019s responsible for showing how money is actually moving in and out of your business. <\/p>\n\n\n\n

The cash flow statement teams up with a profit and loss statement<\/a> as well as a balance sheet<\/a> to provide a full picture of a business\u2019 finances. This statement helps you determine the quality of your earnings while also providing you with an overall sense of performance. <\/p>\n\n\n\n

We at InvoiceBerry previously provided some useful tips for staying on top of cash flow<\/a>. Now we\u2019d like to take it a step further and walk you through the process of actually preparing your cash flow statement. <\/p>\n\n\n\n

Since it\u2019s advisable that businesses prepare statements on a monthly basis during their first few years and then on a quarterly or annual basis later on, the following explanations will come in handy. <\/p>\n\n\n\n

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Cash flow formula<\/strong><\/h2>\n\n\n\n

Because cash is unanimously voted king whenever it comes to business, it\u2019s imperative that you have a clear picture of where you stand at any given time. That way you’ll be able to identify trends and deal with them accordingly. <\/p>\n\n\n\n

The basic cash flow formula states: <\/p>\n\n\n\n

Cash Flow = Cash Inflow \u2013 Cash Outflow<\/em><\/strong><\/h4>\n\n\n\n

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So let’s say you own and operate a small cleaning business, an example of cash inflow would be all the money you receive from your customers for your services. <\/p>\n\n\n\n

On the other hand, your electricity bill, the money you spend on your cleaning supplies and the salaries you pay your staff would all be classified as cash outflows. Subtracting the totals from these two will then give you the (hopefully positive) magic number. <\/p>\n\n\n\n

As simple as this sounds, there is one important thing to keep in mind when dealing with cash flow statements: revenue is recognized as it is earned, not when cash is received. Also, expenses are recorded as they’re incurred, not when cash is paid out. <\/p>\n\n\n\n

So for example, a sale made on January 15th would be recorded for January 15th even if only a part of the balance is paid on that day. Similarly, December’s rent will be recorded for December, even if the bill is actually paid in January.<\/p>\n\n\n\n

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\n \t\t\t\t\t\t\t\tEverything You Need to Know about Your Balance Sheet<\/span><\/a>\n \t\t\t\t\t\t\t\tToday we'll do an in-depth review of the balance sheet, one of the three most important finance documents every small business needs to be familiar with.<\/span>\n \t\t\t\t\t\t\t\t\n \t\t\t\t\t\t\t\tREAD MORE<\/a>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t
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The following steps use our free template<\/a> to depict a simplified cash flow statement for our small cleaning business. In the template example, you’ll notice the sections are broken up according to Cash Receipts or the source <\/strong>of where money has come from and Cash Paid Out or the application <\/strong>of where funds have gone. <\/p>\n\n\n\n

This is so you get a firm understanding of cash inflow and outflow examples.<\/p>\n\n\n\n

The sources of funds might include:<\/p>\n\n\n\n