A Cash Flow Statement shows how cash moves in and out of a business during a specific period. It doesn’t focus on profits—it focuses on actual cash. This report helps answer questions like:

“Do we have enough cash to pay bills?”
“Where is our money really going?”

It’s essential for understanding the liquidity of a business—how easily it can meet short-term obligations.

Begin by recording your total revenue—this includes all the money earned from sales of products or services during the period. It’s the top line of the income statement, and everything else gets deducted from here

In this section, you report cash used for or received from long-term assets such as equipment, vehicles, or property. For instance, buying a new machine would result in cash going out, while selling an old asset would bring cash in. These transactions are part of the business's investment activities and usually don’t occur every day. This section is important because it helps you track how much your business is investing in future growth and development.

This part of the cash flow statement includes cash flows related to funding the business, whether through borrowing or investment. It covers activities such as taking or repaying loans, receiving money from investors, and owner’s capital contributions or withdrawals. These transactions reflect how the business is financing its operations—either by using debt (like loans) or equity (like owner investments). This section helps you understand the sources of your funding and how those choices impact your overall cash position.

At the end of the report, add up the totals from all three sections. The result is the net change in cash for the period. This number shows whether your cash increased or decreased and by how much.

✅ Cash Flow Statement tracks real money movement, not just profits
✅ Divided into Operating, Investing, and Financing sections
✅ Helps monitor cash health and business liquidity
✅ Crucial for planning, loan approvals, and avoiding overdrafts
✅ Even profitable businesses can struggle without strong cash flow