What is a Cash Flow Statement?
A cash flow statement shows how money moves in and out of your business. It’s not about profit, it’s about whether you actually have cash on hand to pay bills, salaries, and suppliers.Â
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Think of it as your business’s oxygen supply.
Why It Matters for Small Businesses
Plenty of profitable businesses fail because they run out of cash. For small businesses, this statement is your survival tool. It tells you:
- If you can cover next month’s expenses.
- Whether you’re investing too much too soon.
- How much debt you’re repaying versus taking on.
Breaking It Down
- Operating Activities: Everyday cash from sales, payments, and salaries.
- Investing Activities: Buying or selling assets like equipment.
- Financing Activities: Loans, repayments, or money you put into the business.
Common Pitfalls
- Confusing profit with cash flow.
- Forgetting about small leaks (subscriptions, overdue invoices).
- Not forecasting ahead.
No-Fluff Takeaway
Cash flow is the reality check your business can’t ignore. Review it monthly, not just at year-end.
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Need help setting up your cash flow? Contact The Busy Bookkeeper. We’ll keep your business breathing.
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