Creating A Cash Flow Statement
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
How to Create a Cash Flow Statement
Introduction
Cash flow, the movement of money into and out of your business, is its lifeblood. According to a study by the US Bank, 82% of business failures stem from poor cash flow management. Regularly preparing monthly cash flow statements can help prevent financial shortfalls. Remember, your business's profits do not necessarily equate to cash flow.
Key Sections of a Cash Flow Statement
A straightforward cash flow statement consists of five parts:
1. Beginning Cash Balance
This section records the cash available at the start of the month, both in your bank and on hand. For example, if you have $800 in your checking account and $400 in cash, your beginning balance is $1,200.
2. Cash In
Here, you list all activities generating cash for your business, such as sales and receivables (payments on old debts). If you earn $1,000 from sales and receive $400 from outstanding debts, your total "Cash In" amounts to $1,400.
3. Cash Out
This section details expenses reducing your cash, including rent, salaries, supplies, loans, and taxes. For instance, paying $700 for rent, $200 for supplies, and $1,000 for salaries results in a total "Cash Out" of $1,900.
4. Net Change
Calculate this by subtracting "Cash Out" from "Cash In." In our example, that's $1,400 - $1,900 = -$500. A positive cash flow indicates growth potential.
5. Ending Cash Balance
Determine this by adding the "Net Change" to the "Beginning Cash Balance." This total becomes next month's "Beginning Cash Balance."
Conclusion and Tips
A negative "Net Change" indicates higher spending than earnings. If this occurs, consider cutting expenses to avoid depleting your cash reserves. Stay tuned for our next article on addressing a negative "Net Change."
You can find the original non-AI version of this article here: Creating A Cash Flow Statement.
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.