A business cash flow statement tracks cash income and expenditures for your business. Funding partners review cash flow statements to see where income is being generated and how cash income is being spent. This provides an overall sense of how your business is run and the results of business decisions made concerning cash expenditures. A cash flow statement does not include profits realized from sales paid for with credit, nor does it show projections for future cash expenditures. Net cash profits will not be the same as net profits shown on your business financial statement.
Information reviewed for cash flow statements is typically split into three categories – including operations, investing, and financing. Operations includes cash income generated by services or products provided; adjustments made to cash income include depreciation, accounts payable, accounts receivable, and inventory. Changes in accounts receivable shown on the balance sheet from one reporting period to the next are also shown on the cash flow statement. The investing section of a cash flow statement documents cash expenditures for business related expenses, such as equipment or real estate. Financing tracks changes in debt, loans, and dividends paid out. A cash flow statement demonstrates the amount of cash income and outflow and indicates how decisions are made concerning cash transactions for your business.