Universal Bookkeeping Reports: Consider the Cash Flow Statement

As a business owner you will see your Balance Sheet, Profit & Loss and Cash Flow Statement regularly. How are these reports connected?

You had an outstanding month, generating your best revenue yet. And your expenses stayed within budget. So why is the cash in your bank account lower than at the start of the month?
The report that can shed light on this quandary is your Cash Flow Statement (or Cash Summary). Consider this statement to be the butter in between the bread and vegemite. It links the Balance Sheet to the Profit & Loss and is a staple to digesting the numbers.

This video explains:

Transcript: This is Annabella from Numeri. Here is a 2-minute guide to understanding your Cash Flow Statement. As indicated by its title this report will show you the figures that are entering and leaving your bank account. A key to understanding this summary is that it reports figures on a cash basis: this means transactions are recorded when they are paid. Let me show you the difference. If we look at our Profit & Loss Statement here we have a very healthy revenue figure for the month, but this is reporting on an accrual basis. This means that you have invoiced your clients, but they haven't necessarily paid you. If we check the cash option instead we can see the figure is much lower because this is the figure the clients have paid your invoices. So, it’s important when you’re looking at your Profit & Loss Statement to compare these two figures, so you have an accurate understanding of what's happening in your business. Another key to understanding the Statement of Cash Flow or the Cash Flow Summary is that it also reports items that are not in the Profit & Loss Statement. This includes depreciation and GST movements. Of course, all figures are connected and if you look at the final figure of your Cash Flow this will also be the same as the Cash Assets on your Balance Sheet. It goes without saying that bookkeeping has a wonderful sense of balance. Would you like to know more? Please send me a message so we can get in touch.