What is a Cash Flow Statement?

How a statement of cash flow works.

A Cash Flow Statement is a financial statement that allows you to see how much cash is coming in and how much is leaving a business over a particular period of time (could be monthly,quarterly,yearly). It presents a record of how much cash is available on hand for the business to access in order to keep it operating successfully.

How do you use a cash flow statement?

The Cash Flow Statement allows an investor to see how well a company can generate cash and where the sources of that cash generation are. The cash that is available to pay a company’s debt obligations and general operating expenses provide important information to determine whether the business is in a strong financial position.

It also allows you to see changes in the cash position of a company from one period to another and can provide useful information for creditors to ascertain the liquidity of the company and help assess the risks of lending.

What's included on a cash flow statement?

  • Included in the statement is information about where the cash is coming from and going to over a particular period
  • Cash flow from operations; this could be cash from sales of goods or services, payments of income tax due in that period, payments to suppliers, salaries, wages and rents
  • Cash flow from investments; this could be an outflow of cash for long term assets
  • A cash flow statement will show cash flow from any financing; this could include payments and dividends to shareholders
  • It will also show if the company is raising capital by taking out debt or issuing stock

What are the advantages and disadvantages of a cash flow statement?

Advantages of a cash flow statement:

  • It is helpful to see how effective a company is at generating cash flow to fund its operating expenses.
  • It can determine the cash position of the company for a particular period
  • A cash flow statement can help to ascertain the optimum cash position for the company
  • It can show the cash earning capacity of a company
  • Provides information to help management planning and budgeting
  • Clearly shows a comparison between actual cash flow with projected cash flow

Disadvantages of a cash flow statement:

  • It can be inaccurate - cash spending can be delayed and manipulated in order to improve the cash flow in a particular period
  • It doesn’t give a complete picture of the company’s financial position
  • Its actual liquidity cannot be assessed only ascertained from a cash flow statement
  • It is not a useful tool for the comparison of similar firms

Have you thought about Invoice Finance as a cash flow solution for your business?

Invoice finance allows you to release cash quickly from your unpaid invoices.

As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.

Get in touch

Contact our friendly UK advisors on our freephone

0808 250 0859

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The benefits of invoice finance companies such as Novuna Business cash flow

  • Boost your cash flow without having to wait up to 120 days for your customers to pay you

  • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled

  • Access funds within 24 hours from initial appointment with our revolutionary digital onboarding process

  • Benefit from our in-house credit control processes, allowing you to focus on running your business, instead of chasing clients for payment

  • 6 month trial period followed by a rolling contract

Want to understand more Cash Flow Finance terms?

Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.

We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.

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If your customers are consumers, please contact our consumer finance division.

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