{"id":3565,"date":"2023-01-20T21:19:30","date_gmt":"2023-01-21T02:19:30","guid":{"rendered":"https:\/\/www.northone.com\/blog\/?p=3565"},"modified":"2023-05-16T14:57:07","modified_gmt":"2023-05-16T19:57:07","slug":"cash-flow-statement","status":"publish","type":"post","link":"https:\/\/www.northone.com\/blog\/financial-management\/cash-flow-statement","title":{"rendered":"What Is a Cash Flow Statement? Definition and Advantages"},"content":{"rendered":"\n

No matter the size of your business, your cash flow is your lifeblood. It\u2019s the factor that determines your ability to expand your offerings and services, affects how you can increase your reach to new audiences, and impacts your ability to keep your business running. And a cash flow statement can help make sure you\u2019re on the right track to meet these goals.<\/p>\n\n\n\n

From small businesses<\/a> to multimillion-dollar enterprises, your cash flow speaks to the health and well-being of your business. That\u2019s why it goes without saying that tracking your cash flow to ensure you stay in the positive each month is a good business practice to adopt early on in your entrepreneurial journey. If you\u2019re not sure how to do that, you\u2019ve come to the right place\u2014read on to learn everything you need to know about cash flow statements.<\/p>\n\n\n\n

<\/span>What is a cash flow statement?<\/span><\/h2>\n\n\n\n

A cash flow statement is a document that communicates how much money is coming into and out of your business bank account in a given period of time, whether that be a month, quarter, or year. Along with the balance sheet and income statement, the cash flow statement rounds out the three most important financial documents for a small business owner.<\/p>\n\n\n\n

While the income statement and balance sheet tell you essential information about the success of your business, they don\u2019t always convey the amount of money you actually have available to you at a specific moment in time. The cash flow statement, on the other hand, is designed to reflect not only what\u2019s come in or gone out, but also what is currently available. For example, most small businesses account for depreciation as a monthly expense in order to show the cost of owning it over time, even though there\u2019s no money actually leaving your account for that expense.<\/p>\n\n\n\n

The cash flow statement is most commonly structured to include the following four components: cash flow from operating activities, investments, financing, and (if relevant) non-cash business activities. This makes your business\u2019s current cash position super clear, in addition to your incoming and outgoing trends for a given period.<\/p>\n\n\n\n

<\/span>What are the advantages of cash flow statements?<\/span><\/h2>\n\n\n\n

There are different opinions on whether or not tracking cash flow in this way is necessary for everyone, but since it provides more reliable insight than accrual-based accounting, it can be a useful tool for the vast majority of business owners. Here are a few compelling reasons why you should consider making use of the cash flow statement in your company:<\/p>\n\n\n\n