Creating a Business Cash Flow Statement

If you are new to working with a factoring company, you may be wondering what a cash flow statement is and what purpose it serves. A cash flow statement is a required document that records how much cash and cash equivalents are entering and exiting a company. In other words, it shows how much capital is being brought into and paid out by the organization. A cash flow statement gives investors and lenders a look at how you manage your company’s finances and how you acquire the cash.

Difference Between Cash Flow Statement, Balance Sheet and Income Statement

A cash flow statement, income statement and balance sheet all sound similar, so what makes them different? A cash flow statement does not feature a firm’s future incoming/outgoing money that is recorded on credit. The CFS displays the benefits of factoring on the company’s balance sheet and income statement.

How to Create a Cash Flow Statement

Now that you understand the reason for a cash flow statement, it is time to create one for your company. When you are starting with small business invoice factoring, it is important to have your statements made for a smooth process. The CFS is comprised of three sections: Operating activities, investing activities and financing activities. 

• Operating activities – This section accounts the movement of cash from regular business activities, such as sales and purchases of goods and services. 

• Investing activities – This part is made of all transactions related to the sale and purchase of long-term assets. 

• Financing activities – This area can cover a wide range of activities, such as transactions with stockholders, the organization’s creditors and investments in treasury stock, to name a few. 

The CFS combines those three sections into a single form that totals the company’s overall balance. You can create a simple CFS to communicate this needed information to investors. Below is an example for you to follow when crafting your own CFS.