What goes into the cash flow statement?
Your business generates cash in many different ways. The Statement of Cash Flows breaks it down into three main sections:
- Cash Flows from Operating Activities – shows what cash has come in and gone out as a result of the main business activities, (such as receipts from customers, payments to suppliers, wages paid to employees and so on.)
- Cash Flows from Investing Activities – includes things such as payments for new assets like office equipment or a new company vehicle. It also includes receipts from the sale of assets, and any investments made.
- Cash Flows from Financing Activities – shows any loan repayments, proceeds from new loans, or money invested into the business or taken out by the owners.
A cash flow statement tells you where the money went. A profit and loss statement says nothing about principal payments you make to the bank. You could have reasonably good profits, but the amount of money you pay your bank every month could be putting you out of business.