What is Cash Flow?
A Cash Flow is a statement which tells the amount of cash how much you have in hand for a specific period in reality. In other words, it gives how much cash is entering and leaving from the Business, Along with Balance sheet and income statement. Basically, It helps in moving the cash and invest it accordingly, make sure you have enough cash to keep the business to operate.
It includes all the cash brought in from sales, but not sales made on credit that haven’t been actually paid for. Similarly, it won’t show raw materials and other items that have been purchased on credit but not paid for. This is a really crucial report for all the small businessmen because they usually work in cash and looks to their cash inflow and outflow on a daily basis and at the end, how much profit they got from it. Likewise, companies need to be aware of their cash position for a particular period.
How Cash flow statement works?
Let us consider how does the Cash flow is manage according to the different forms of business and which is divided into three activities: Operation, Investing and Financing.
Cash Flow From Operation: The first section of operating activities are the source and uses of cash from small business activities. Especially, it reflects how much cash is generated from a company product and services. These includes:
1. Receipts from sales of goods and services
2. Interest payments
3. Payments made to suppliers of goods and services used in production.
4. Salary and wage payments to employees
5. Rent payments
Cash Flow from Investing: The second one means that any source and uses of cash from a company investments. A purchase or sale of an asset, loans made to vendors or received from customers, or any payments related to a merger or acquisition is included in this category. In short, changes in equipment, assets, or investments relate to cash from investing.
Cash Flow from financing: The third and final one includes the source of cash from investors or banks, as well as the uses of cash paid to shareholders. Payment of dividends, payments for stock repurchases, and the repayment of debt (loan).
Negative Cash Flow Vs Positive Cash flow
When your cash flow statement shows a negative number, that means you lost cash during the accounting period—you have negative cash flow. It’s important to remember that, long-term, negative cash flow isn’t always a bad thing. Some months you may spend cash in order to make money later on—by investing in equipment.
When you have a positive number in your statement, you have got positive cash flow for the month. It isn’t always a good thing in the long term.
Objectives of Cash Flow Statement
1. It shows the cash earning capacity of the firm.
2. It indicates different sources from which cash been collected and various purposes for which cash has been utilized during the year.
3. It helps the management in cash planning and control so that there are no shortage or surplus of cash at any point of time.
4. It evaluates the ability of the firm to meet obligations such as loan repayment, dividends, taxes etc.
5. It discloses the reasons for differences among net income, cash receipts and cash payments.
How to check and share the Cash flow statement report in Book keeper?
1. Select the particular reporting period first for whichever date you want to check it out from the main Dashboard on right side top corner.
2. Go to All report > Select Cash flow statement > Display report.
3. In this report, you can get particular date wise and the Total cash flow means that the total expenditure + total revenue which you have generated and on the basis of it, you get the final value.
4. You can even open the same report in any of the tool like Excel, PDF and Word. Moreover, you can take out the print.