Cash Flow Clarity: Build a Small Business Statement That Actually Works

 

Having the awareness of the position of cash in your business is vital particularly when you manage a startup or a small business where every rupiah matters. Although your profit and loss statement may indicate your business is doing well, the cash flow statement is a more revealing indicator: can you really pay your bills, afford to pay employees, or pursue your next biggest opportunity?

So how do you go about making one, what makes it unique and different to other financial statements, and why do you need the right cash flow report template that is particularly good in excel and can make whose planning and discussions with your investors, much easier.

Cash Flow vs. Profit and Loss: What’s the Difference?

Cash flow is always taken confusedly with profit by many first time entrepreneurs. The profit and loss account (or income statement) indicates your revenues and expenses in a certain period of time. It can be excellent in helping you know whether or not your business is technically profitable, but it may not indicate what is in your bank-account.

Cash flow statement, on the contrary, monitors the real inflow and outflow of cash in your company. It is not merely the operation income but also the investment purchases, loans settlement, and capital injection. You can have thousands worth of receivables on paper, but until you get that money in the bank it will not help you with real costs.

What Financial Statements Do You Need for an Investor Pitch?

Investors are not interested to know about your mega vision- they want some numbers. You are expected to prepare three important financial statements so that you can make a common proof and believable business case:

1. A profit and loss statement, that will indicate the amount of money that you have made and how this is converted to net profit (or net loss).
   
   

2. A balance sheet, that provides a snapshot of your business assets, liabilities and equity.
   
   

3. And of course a cash flow statement, which indicates to you whether your business is producing sufficient cash to stay open or not.
   
   

To have the three is a sign that will boost investor confidence in your business and it will be a sign that you are serious about your business finances.

Cash Flow Statement Format in Excel

When drawing up your own cash flow statement in Excel, the standard format normally divides the cash movement into three categories:

• Operating activities: daily business operations such as sales, payment to suppliers and wages.
  
  

• Investing activities: the equipment is bought or investments in other businesses.
  
  

• Financing activities: payment of loans, proceeds of investors or dividends.
  
  

The minimal amount of information that can go into an Excel format is a list of the categories (columns) cash sources and uses (rows), and formulas to determine your net cash flow every period. You can find ready templates on downloading or build your own basing on this structure.

Examples of Cash Flow Statements for Startups

A standard cash flow statement of a typical startup deal can be very different in comparison to that of a mature business. Startups almost always experience a balance of negative cash flow during startup months when the time to develop the product, attend to marketing, and employ new people is spent- before the revenues follow. This is quite normal as long as you are able to indicate how, and when the business anticipates to be cash-positive.

To illustrate, a SaaS company which is at its start-up phase may report an outflow on cash expenses at the early stages of development, such as software development and renting servers and will later receive cash generated by rolling subscriptions. In the meantime, product startup could indicate cash inflows resulting out of pre-orders but was awaiting delivery by suppliers.

These are the kinds of examples you can be using when you are pitching towards investors and they are interested in knowing how their money will help and what returns they will get immediately.

Cash Flow Report Template for Business Planning

When you need to apply to a small business loan, build a budget for the next quarter, or need to prepare a pitch, a good template of cash flow reports can save you many hours of manual work. An effective template must allow you to estimate the future earnings and outflow, provide monthly amounts and balances of cash, and highlight the times when you may require more capital.

One can manually create it in Excel with simple calculations or they can buy professional templates on financial education websites and modeling courses. The secret is consistency: keep your numbers current and up to date monthly and use this tool as a living, breathing piece of paper to make business decisions off of.

Final Thoughts

Learning and knowing how to create a cash flow statement is not an accounting activity alone; rather, it is a survival skill of small business owners. It can assist you in planning, preventing crisis, and discussing with confidence with the investors or the lenders. And when you understand the difference between a cash flow and a profit, you will begin to make much more intelligent, data-driven decisions.

Regardless of whether you want to use a cash flow statement structure in Microsoft Excel, present your financial statements to an investor, or examine some examples of cash flow statements in a startup, you are establishing long-term success. Do not wait until you come into a cash crunch rather prepare your model today and gain control over your business finances.