What is a cashflow statement?

A Cash Flow Statement is like your business’s money diary—it tells you where your cash came from, where it went, and whether you actually have enough left to keep the lights on. Because let’s be real, profits on paper don’t mean much if your bank account is empty.

The cash flow statement tracks real, actual, in-your-hands money moving in and out of your business. The cash flow statement in stub is divided into two sections:

1. Cash in: This is any cash that you earn from your business. Money from selling a product or service, money from the sale of an asset or money earned from an investment.
2. Cash out: This is all the cash that leaves your business. Think about it as business expenses, buying materials to make more products or equipment for your business. Cash movements linked to loans or paying back debt are also part of cash out.

Positive cash flow = More money coming in than going out. This means your business is making enough money to cover expenses and reinvest money back into your business.

Negative cash flow = More money going out than coming in. This isn’t always bad (growth phase, big investments), but it’s risky if it happens too often.

When do you use a cashflow statement?

Regularly: Use it monthly or quarterly to keep an eye on your business’s cash position.

When making big decisions: Like planning a big purchase, growing your business, or taking out a loan.

When things feel tight: If you're worried about paying your bills or suppliers on time, the cash flow statement can show you the problem areas.

Why should you use a cashflow statement?

Because cash is king—you can’t pay bills with "potential future profits."

To avoid financial panic—nothing is worse than realizing payday is tomorrow and your account is drier than the Sahara.

To make smarter business decisions—knowing when to spend and when to save keeps your business running smoothly.

In short, the cash flow statement is your go-to tool to ensure your business has enough money to survive and grow. It helps you understand not just profits, but the actual cash in your pocket. Think about it as your business’ reality check.

Tips on how to use a cashflow statement?

• If your cash flow is positive – your core business should be generating cash. If not, you may be relying too much on loans or external funding.
• Money coming in on a consistent basis – Regular money from sales and customers means a stable business.
• Managing your cash out – If money is flying out faster than it’s coming in, it’s time to cut costs.
• Enough Cash to Cover Short-Term Needs – Can you pay salaries, rent, and suppliers without stressing?
• Growth Investments – Are you reinvesting in things that will grow your business, like new equipment or marketing?