Cash Flow Analysis Template

Cash Flow Statement Template

What is a cash flow statement template?

A cash flow statement is one of the “Big Three” financial statements for businesses, along with the income statement and the balance sheet. While income statements show you how much money you’re making, and balance sheets show you how much you have, cash flow statements explain where the money is coming from, where it’s going, and how much actual cash is available.

A simple way to think of it is this: If you’re out for dinner with a well-dressed businessman, an income statement will show you that he receives a high salary, a balance sheet will show you that he’s wealthy and owns lots of cool stuff, and a cash flow statement will show you that he has spent $3000 on sushi this year but also doesn’t have any money on him and needs you to cover dinner.

More specifically, for businesses, a cash flow statement tells you a lot about how a company’s operations are running and how financially healthy it is. Liquidity (available cash) is an important metric for any company to track, which is why it can be helpful to have a cash flow statement template like this one which breaks down operating, investing, and financing activities, to make sure you understand where your company’s cash is going and how much you have available.

Did you know?

Cash flow statements show actual cash movement, as opposed to accrual accounting methods which may amortize expenses over a longer term. So where accrual accounting may convince you that $200 per year on hamburgers is a reasonable expense, a $$$$ cash flow analysis template may suggest that spending $10,000 today on a lifetime membership to Bob’s Burger Barn is a potentially unwise expense. (Especially because you might not make it another half-century; ask your local actuary for details.)

82% of small businesses that fail can blame poor cash flow management. Technically, 100% of failed small businesses could blame poor cash flow management, but 82% of them would be correct.

Using a cash flow forecast template to drive your budget isn’t entirely different from farmers using a weather forecast to plan irrigation of their crops. In both cases, you’re hoping things will keep growing, but making sure that you have the capability to make it rain if necessary.

What is a cash flow statement?

A cash flow statement is a document that shows the cash – including money from investments and convertible assets – moving in and out of a business, broken down by its source. This is used to make sure a company has enough cash to meet its day to day expenses, and to project how cash flows in future may shape up.

A cash flow statement – which is also called a statement of cash flows – is used alongside a company balance sheet and income statement to review the financial performance of a business. These 3 key financial statements are used by investors and business owners to manage and improve the profitability of their business.

Cash flow statements are also used when a business is looking for investment or a loan, to demonstrate the company is delivering a profit and using income wisely.

What is a cash flow statement?

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Why You Need a Cash Flow Analysis Template

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82% of small businesses fail because they don’t manage cash flow well enough, according to a U.S. Bank Study. You can’t ignore cash flow at any stage.

 

Even big organizations can collapse due to cash flow issues. For instance, SunEdison, a renewable energy company, declared bankruptcy in 2016 due to insufficient cash flows. And ever since the 737 MAX crashes, Boeing has dealt with cash flow problems. The last few years have been difficult for Boeing due to canceled orders and COVID-19 flight restrictions.

 

You may have also heard about how Toys R Us collapsed. The retail chain failed to generate sufficient revenue and cash flows from the holidays to maintain operations, something that Gamestop seems to be pulling off due to the new generation console launches this year.

 

These stories should serve as a warning: Cash flow can make or break a company in just a few short years. Every business must develop reliable strategies for monitoring, maintaining, and generating new cash flows.

 

In previous articles on cash flow analysis, we’ve covered topics such as:

 

  • What is a cash flow analysis?
  • How to get more out of cash flow statement analysis
  • What you need to know about discounted cash flow analysis

Here, we’ll give you a cash flow analysis template, so you have a guide for managing cash flow at your organization.

Why you need a cash flow analysis template

For public entities reporting to shareholders, a cash flow statement is one of three financial statements the SEC requires. The other two are:

 

  • Balance sheet: Lists assets, liabilities, and shareholder equity
  • Income statement: Shows whether there’s a profit or a loss

The SEC requires that businesses provide cash flow statements that detail their cash inflows and outflows (i.e., the sources and uses of cash). Investors can see where and how the company spends money and where and how they generate cash. It allows them to examine the financial profitability and sustainability of the organization.

 

Internally, a cash flow statement details whether you have enough cash on hand for expenses, inventory, labor, and other outflows. It also details whether you’re generating enough money from operations and investments.

 

The statement also shows what’s working and what’s not. Analysts and the CFO can see where they should invest more time and resources into the business, cut spending, how certain investments are performing, and more. A cash flow also sheds light on just how sustainable the current operation is (how long they can last with the same results). After all, without adequate cash flow, any business will fail.

 

Cash flow statement analysis can also help organizations plan finances around an uncertain future. For instance, the COVID-19 pandemic hit many companies hard. As research from Deloitte highlights, businesses with unstable cash flows or low cash reserves are particularly vulnerable. Companies can look at cash flow statements to figure out what they need to do to overcome black swan events and protect themselves from the unexpected.

 

To summarize, a cash flow statement isn’t just about looking at what you’ve been doing. It’s also about taking actionable steps towards a future with healthier and better cash flow. That’s why having a cash flow analysis template that works for your organization is so crucial.

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What a cash flow analysis template should include

A cash flow analysis template includes the following three categories:

  • Operating activities: This includes cash receipts and cash paid. Cash receipts come from customers and other operations that generate revenue. Cash paid includes outflows such as wage expenses, inventory purchases, administrative expenses, interest paid on debt, and income taxes. Operating activities also include depreciation and amortization, and any changes in working capital.
  • Investing activities: Inflows here can include revenue from the sale of property, equipment, stocks, and other assets, as well as the collection of principal and interest on loans. Outflows here can include expenditures for investments, such as land, real estate, and securities, as well as things like equipment purchases and loans given to other organizations and individuals.
  • Financing activities: Cash outflows include payments made to investors and stockholders (dividends, interest, etc.). If there are cash inflows from financing activities, it’s from raising funds through bond sales or equity issuance.

Let’s go over what a cash flow analysis statement template looks like.

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What your cash flow analysis template should look like

Every organization differs. What’s in manufacturing financial models will vary from pharmaceutical financial models.

So, we’ll provide a general cash flow analysis template for you to follow. Of course, how you fill it in depends on your unique operating activities, investing activities, and financing activities.

Below is an example of a cash flow statement template. Red text signifies a cash outflow, while green text signifies cash inflows. Activities in black could be a cash outflow or inflow.

cash flow template

Again, this is a very general cash statement analysis template. What your organization writes down in each field

 

As you can see, you can track cash flow over several years to see how strategies you employ increase or decrease cash flow. The closing balance shows your current cash on hand. And by subtracting the opening balance from the closing balance, you can see whether you had a net increase or decrease in cash for that period.

Advice for making your cash flow statement right

First, you need to be consistent with how you count cash flows from operating activities. You can use the direct method or the indirect method. The direct method involves tallying up all your cash inflows and cash outflows individually. The indirect method begins with taking net income and then adding or subtracting cash based on data from various operating activities.

 

The indirect method is less time-consuming and has the advantage of enabling you to see clearly how and why your cash flow is different from the net income. However, the direct method provides a more detailed view of how your organization earns and spends money. Whether you should choose the indirect or direct method depends on your organization. Just be consistent.

 

Second, you should do cash flow analysis on a rolling basis. This way, you have dynamic, updated cash flow numbers instead of static reports. This will make you more agile and allow you to take steps to fix cash flow issues before they damage that closing balance at the end of the next quarter.

 

Finally, don’t use spreadsheets for your cash flow statement templates. They’re static and have to be manually updated, which leaves them vulnerable to errors. It’s also a waste of resources, as you may have to reconcile data across multiple spreadsheets and check if formulas are still right.

 

Instead, you need cash flow software that automatically updates cash flow data by connecting every element of your organization. This way, you know where your company stands and can make the best possible decisions at each moment in time.

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