Cash Flow
Where cash came from and went, by operating, investing and financing activity, built from your postings.
The cash flow statement explains the difference between profit and your bank balance. It sorts cash movements into operating, investing and financing activity.
It uses the indirect method: it starts from net income and adds back non-cash expenses such as depreciation.
The three sections
- Operating
Cash from running the business: net income, adjusted for depreciation and for changes in what customers owe you and what you owe vendors.
- Investing
Buying and selling long-lived assets such as equipment, vehicles and property.
- Financing
Money from and to lenders and owners: loan proceeds, principal repayments, capital contributed, draws.
- Check where the cash came from
Cash from operations comes from the business itself. Cash from financing is borrowed or put in by owners, and loans have to be repaid.
Why profit and cash differ
Revenue invoiced but not collected is profit you can't spend. Loan principal repayments use cash but aren't an expense. Owner draws are equity. Equipment purchases use cash now and reach the income statement over years, as depreciation.
A growing business often pays for materials and labor before customers pay it. This report shows that gap; the income statement doesn't.
Good to know
- Built from your posted entries. A year-end closing entry is left out, since it moves no cash.
- For what's coming due, read A/R aging and A/P aging alongside it.
- Export to PDF, Excel or CSV, or print.