You likely already know that cash flow statements are an essential tool for managing business finances. And yet, when juggling so many competing responsibilities, it can be easy for small to midsize companies to put off reviewing and analyzing their cash flow.

Let’s look at why you should make it a priority.

What Are Cash Flow Statements?

Cash flow statements are financial reports that provide a snapshot of incoming and outgoing cash for a month, quarter, or another time period. The statements show the source of incoming money, whether from operating activities, investing activities, or financing activities. The sum of those three activities is called net cash flow.

What Cash Flow Statements Can Tell You About Your Business

Small to midsize businesses can benefit from cash flow statements because they can provide a nuanced view of financial performance for the whole company or for individual teams or divisions.

If your business is growing rapidly, you can use your cash flow statements to determine whether you have sufficient funds to expand operations, or if you first need to seek additional funding. They can also help you determine if too much of your cash is lying idle, in which case you might want to invest in shares or buy inventory or other assets. If the statements show that you have a shortage of funds, you can start looking for options such as borrowing.

How Cash Flow Statements Support Planning

One of the most essential uses of cash flow statements is in the planning and budgeting process, where it can be used along with balance sheets and income statements to develop informed budgets and projections.

For example, if they show a trend toward negative cash flows from operations, you might need to look for ways to cut costs or explore potential new sources of revenue. Conversely, it might be time to invest in growth opportunities if your cash flow shows gains over multiple months or quarters.

Get the Support You Need

Insero & Co.’s financial professionals have decades of experience working with businesses and are available to help you find smart, efficient solutions to your accounting and finance challenges. We offer audit, tax, outsourced accounting, recruiting, and business advisory services to assist with your day-to-day operations and strategic challenges.

Do you have questions or want to talk?

Call us at (800) 232-9547 or fill out the form below and we’ll contact you to discuss your specific situation.

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About the Author: Insero & Co.

Insero & Co. CPAs is a full-service public accounting firm providing audit, tax, and consulting services to individuals, government agencies, nonprofit organizations, and businesses ranging from privately held family businesses to multi-national corporations. Learn more about our services >


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