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Creating a Cash Flow Statement

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Creating a Cash Flow Statement


A cash flow statement is a vital financial tool that tracks the flow of cash in and out of your business over a specific period. Here's a step-by-step guide to creating a cash flow statement for your small business:

1. Understand the Components:

A cash flow statement consists of three main sections: operating activities, investing activities, and financing activities. Operating activities include cash transactions related to your business's core operations, such as sales and expenses. Investing activities involve cash flows from the purchase or sale of assets, while financing activities encompass cash flows from borrowing, repaying loans, and obtaining equity financing.

2. Gather Financial Data:

Collect financial information for the period you're creating the cash flow statement, including cash receipts and payments, accounts receivable and payable, loan transactions, and any investment activities. Ensure accuracy and completeness of the data to generate an accurate cash flow statement.

3. Calculate Cash Flows:

Organize the financial data into the appropriate sections of the cash flow statement: operating, investing, and financing activities. Calculate the net cash flow for each section by subtracting cash outflows from cash inflows.

4. Analyze Cash Flow Trends:

Review the cash flow statement to identify trends and patterns in your business's cash flow. Analyze fluctuations in cash flows to understand the underlying factors driving changes in your business's financial position. Use this insight to make informed decisions and improve cash flow management.

5. Monitor and Update Regularly:

Regularly update your cash flow statement to reflect changes in your business's financial activities and performance. Monitoring cash flow regularly allows you to anticipate potential cash shortages or surpluses and take proactive measures to address them.

6. Seek Professional Guidance:

Consider consulting with a financial advisor or accountant for assistance in creating and interpreting your cash flow statement. Professional guidance can help ensure accuracy and provide valuable insights into your business's financial health and performance.


Creating a cash flow statement is essential for small businesses to track cash flow, identify trends, and make informed financial decisions. By following these steps and regularly monitoring cash flow, you can improve financial management and achieve long-term success for your business.

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