A cashflow statement shows how your business has generated and used cash over a set period, either an historical period or a future period using predictions. In essence, it is a summary of any funds received by the business and then what those funds were spent on, which culminate in a net cash positive or cash negative position for the period. This net position is then added to the cash position at the start and leaves an overall cash position at a set date.
But How Does It Work and What Does it Really Show?
In simple terms, a cashflow statement integrates information from the profit and loss statement and balance sheet to form a current cash position.
You may also find notes within the financial package provided that will help explain certain sections, any significant items or any predictions made should you receive a cashflow for the next 12 months.
Why Is It Useful?
The cashflow statement gives you a measure of how your business is performing on a cash level, whereas a profit and loss shows how business is performing on paper. The benefit of this is that it will help demonstrate the funds available to pay bills, liabilities and to fund the operating activities of your business, rather than showing your potential position.
The cashflow statement can also provide vital information on your business.
– How strong is current cash position?
– What is the long-term position for your business?
– Which activities generate the greatest cashflow, and which ones might be losing cash.
If you’d like to understand move about your cashflow, what your true position is and the possible future position of your business please get in contact with us.
