Cash Flow Statement

Good cash management can improve a company's liquidity, reduce costs and increase profitability.  The success of every business will depend on their cash flow.  The cash flow statement uses data from the profit and loss and balance sheet statements.  The important areas to predict are: 
  • When will the money generated from sales actually arrive? Will there be any allowances for bad debts?
  • When will the business pay out for costs such as salaries, equipment and raw materials?
  • Some payments are made in advance such as insurance and rent and rates or by monthly standing orders.
  • Other payments to be made such as social security, Medicare, sales tax, tax payments and loan repayments
  • What other money may be received such as loans or grant payments.