Being financially healthy is necessary for the success of your business. A cash flow statement provides greater insight into your company’s finances. A business accountant can prepare this report, as well as an income statement and balance sheet, to give you a comprehensive view of your financials. Here’s what to know.

What Is a Cash Flow Statement?

Cash flow statements show how money comes into and goes out of your business. They consist of the following three major components:

Cash Flow From Operating

This section lists sales of goods and services, as well as outgoing money necessary for operational expenses. Operating expenses can include money spent on supplies or replenishing inventory, or expenditures related to purchasing new equipment. 

Cash Flow From Investing

This component lists incoming and outgoing monies related to investment activities. If you sell a business asset, the earnings would be listed here. The money spent on the acquisition of a new company would also be included in this section. 

Cash Flow From Financing

This section lists cash coming in and out for any financing activities, such as money going to and from financial institutions. Payments received from investors are considered cash in, while loan payments or dividends paid to shareholders would be considered cash out. 

How Can It Help Your Business?

Even if your business is turning a profit, that doesn’t mean it’s financially healthy. Many businesses run into situations where they’re spending more than they’re earning, which leads to instability if the issue isn’t identified and addressed.

A cash flow statement includes profits generated by sales and investments, but it also contrasts those figures with the money leaving your business. This provides a more comprehensive view of financial health and stability. 

Along with increasing your understanding of your business’s financial health, cash flow statements are crucial for bringing on new investors. People putting money into your business want to rest assured they’re making a worthwhile investment. By showing that your business manages the flow of cash efficiently, you’re more likely to win the favor of potential investors. 

Enlisting an experienced business accountant to work on your cash flow statement ensures the best possible results. With more than 40 years of experience, Sharrard, McGee & Co., PA, assists businesses throughout the Triad area in North Carolina by offering a range of accounting solutions. When it comes to cash flow management, they can create short- and long-term projections so that you have the most accurate information available. Learn more about their services online, or schedule a consultation with a business accountant by calling (336) 884-0410 for their High Point office. Contact (336) 272-9777 to reach their Greensboro location.