Simple Cash Flow Statement for Small Business

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Traditional financial statements – with categories of assets, liabilities, and profits and losses – are essential sources of information for small business owners. However, understanding the business’s cash flow and its daily net cash position is often even more critical to the owner’s ability to manage the business effectively. A cash flow analysis tool is crucial for tracking incoming cash, cash outflows, and resulting cash balances.

The Simple Cash Flow Statement For Small Businesses Template offers three excellent models for this purpose. Using it, you, the business owner, can easily track your income, payments, and your business’s ending cash position. It also helps you to fully understand the impact that all your business processes have on your cash position.

The template can be used for planning for future cash flows or for reporting the financial impact of your past business activities. It’s easy to set up, use, and understand. Let’s take a look at the template and what it provides.

Three Models

The template provides three models. We’ll discuss each below and provide examples for their correct use.

Small Business Indirect

The first tab of the template is titled “Small Business Indirect.” This report is useful for analyzing the business’s cash flow when using your accrual-based balance sheet and profit and loss statements as your source of information for input.

Here’s a picture of the blank report.

Note that the report comprises four sections. The first, Operating Activities, reflects the cash generated (or used) by the business’s primary on-going activities. This reflects the cash flow from the core of the business.

The second, Investing Activities, shows the cash generated (or used) by business activities that may be occasional or more elective. Proceeds or costs of purchase/sale activities of Property, Plant, and Equipment (PPE), Intangibles (patents as an example), or Investments (stocks or bonds as examples) are reflected here.

The third section, Financing Activities, records the owner’s injections or withdrawals of cash. You could also insert a line here that would account for financing or loan (i.e., borrowing/repayment) activity. Loan proceeds are a source of funds, while payments are uses.

The fourth section reveals the change in the company’s cash position resulting from the activities detailed above.

Note the line “Exchange difference on translation of foreign currency.” This field is used to display the result (source/use) of transactions done in currencies other than the business’s native currency. Many small businesses conduct their transactions exclusively in their native currency, and if that applies to your business, this line can simply be ignored.

However, if your business activities cross international borders, and if those transactions are nominated in the currencies of other countries, this line could be very important. Currency exchange rates can vary quickly and dramatically. And those changes can result in either an increase (i.e., source) or a decrease (i.e., use) in cash available to the company. The net effect of such fluctuations over the timeframe of the model is recorded here. Increases in value are shown as positive (or “plus”) entries. Decreases in value are shown as negative (or “minus”) entries.

The templates (and our examples) assume that the business’s home currency is U.S. dollars. The models will accommodate any currency your business uses. Using dollars is simply a device to aid our explanation. The models can easily be changed to reflect any currency supported in the Excel program.

Small Business Indirect Example

We’ve prepared an example showing how this tab would work as a reporting tool. We’ve named our fictional company “ABC Sales Company” and selected the twelve months of the preceding year as the reporting timeframe.

In our example, you can see that the business’s operations were favorable over the preceding year.

Sources of cash were: Net Income, Accounts Payable, and Proceeds from Sale of PPE / Intangibles / Investments. The business did well, so no additional capital injection from the Owner was required. If you had injected funds, that additional investment would have been a source as well.

Uses of cash were: Accounts Receivables, Payments to buy PPE / Intangibles / Investments, and the Owner’s Withdrawal.

Note that there is nothing inserted into the line “Exchange Difference on translation of foreign currency.” We discussed this and its pertinence above. Our example assumes that all transactions are domestic and use U.S. dollars. Therefore no entry to this line is necessary.

When using this tab, it is essential to remember that any use of cash (such as carrying accounts receivable) must be input as a negative (or “minus”) number. Placing a positive (i.e., “plus”) number in any of the uses fields will render the report inaccurate.

In our example, you began the year with $15,000 as your beginning cash balance. Your business activities (net of your Owner’s Withdrawal) netted $20,00 in cash, raising your cash total at the end of the year to $35,000. Congratulations!

Small Business Direct

The second tab is titled “Small Business Direct.” This model assumes that all transactions are in cash. Accruals are therefore immaterial.

This also can be used to forecast the results of future business activity or to report the results of prior activity. Here’s a look at the model before any data is input.

Note that the sections of this form are the same as they were in the first one. And each section performs the same function as before. However, since this model deals in cash transactions only, no accounting terms are used.

As with the prior tab, the admonition to input uses as negative (i.e., minus) entries applies.

Below is an example demonstrating the form when it’s properly filled out.

Small Business Direct Example

As you may have anticipated, this form reflects the same business activity over the same timeframe as the first tab with the same result.

However, this format provides a more ‘granular’ look at what happened in the business over the preceding year.

The main difference is in the first section, Operating Activities.

Here we see the actual sales/revenue and the expenses/cost numbers. These were ‘hidden’ in the prior model, as we saw only the Net Income that resulted from these activities. In this model, we can see and evaluate the business activities that resulted in the financial results reported.

Sources for this data may include the financial statements but also transaction ledgers, the checkbook register, and other transaction recording techniques the business uses.

The other three sections are identical to the first model.

Wherever your source data originates, this model provides a concise and clear picture of the business’s financial activities and their results.

Small Business Simple

The third tab is titled Small Business Simple. This tab offers an abbreviated form for determining the business’s cash flow, but without the level of detail provided in the first two tabs.

It also can be used to project future revenue derived from expected business activity as well as reflect results from past activities.

Here is a copy of a blank Small Business Simple form.

This third form presents its information in three sections.

The “Cash Inflows” section does as its name implies and displays all sources of cash generated during the reporting timeframe. Note that financing or loan proceeds are not included, but could easily be added to this section.

The “Cash Outflow” section similarly details how available cash was consumed during the same timeframe. Loan payments could be recorded here as well.

These two sections provide summaries of all of the business’s activities in their “Net Cash Inflow” and “Net Cash Outflow” totals.

It is important to note that Cash Outflows must not be presented as negative (or “minus”) numbers in this model. This model requires that entries in the Cash Outflow section be entered as positive numbers. The model will account for the differences between sources and uses when it calculates the Net Change In Cash in the third section.

The third section summarizes the effects of the two prior sections. It presents the Net Change in Cash that results from the business’s activity, adds that result to the Operating cash (Beginning of the Year), and produces a Net Cash Flow for the reported timeframe.

The result is the amount of money (or net income, if you prefer) now available to begin the next business cycle or timeframe for reporting.

You will note, however, that there is no provision in this model for the Owner’s Investment or Withdrawal. The Simple Cash Flow model is most useful for the owner’s determination of whether or not to withdraw cash from the company and, if so, how much. Or it can be useful as a report to other business stakeholders.

The example below demonstrates how the form is to be filled out.

Small Business Simple Example

This example displays the same business activity as the previous two, but without some of the details otherwise available. It is most suitable for a “snapshot” of your business activities.

Summary

Your analysis and understanding of your business’s cash flow are essential if you are to manage your business effectively. The Simple Cash Flow Statement for Small Businesses template provides you with three distinct “looks” at your business’s cash flow and the effects of your business’s activities. We encourage you to use them for both projecting your expected business results as well as reporting past outcomes of your business activities.

Remember also that these forms are suitable for any timeframe. Our examples have assumed an annual operating cycle. However, the tabs may easily be utilized on semi-annual, quarterly, monthly, or even weekly bases.

However you decide to use them, we are confident that they will provide invaluable information regarding your business and its operation.

Thank you for your time and attention. We wish you the best of luck in your business endeavors.