SMALL BUSINESS FINANCE 5: CASH FLOW STATEMENT
In an Income Statement, if you are selling on credit, the Sales figure will not be all Cash (i.e., some in Accounts Receivable). You may not have paid all your Expenses yet (i.e., some in Accounts Payable). The Cash Flow Statement will show you what you have actually received and paid out in Cash.
CASH INFLOWS. This will show receipts from Cash Sales and collections of previous periods’ Sales (i.e., products sold on credit). If you borrowed additional working capital during the period, the proceeds of the loan should appear in Cash Inflows.
CASH OUTFLOWS. This will include: the commissions you paid your salespeople, the purchases of raw materials for your products, and the expenses you actually paid for during the period (the rest would go into Accounts Payable). Payments for expenses you hadn’t paid for in previous periods (i.e., outstanding Accounts Payable from previous periods) also go into this account. If you bought additional equipment (a capital expenditure), this should also be included. Payments of loan principal & interest also go into this account, as well as payment of taxes.
NET INFLOW is the difference between CASH INFLOW & OUTFLOW; and this is added to your Cash at the beginning of the period –resulting in your Ending Cash.
