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Anatomy of a Cash Flow Statement

Whether you’re a financial wiz or someone who struggles to keep your books in order, chances are you’re at least somewhat familiar with a cash flow statement. Simply put, a cash flow statement is a report of the cash that’s generated and used by your business during a set period. They’re usually generated quarterly, but you can do a cash flow statement for any period that you like. It’s one of the quickest ways to assess the financial health of your business, and you may be surprised by what it can reveal.

One of the biggest benefits of a cash flow statement is that it gives you an accurate financial picture of where your business is right now. It shows money that’s coming in and going out in real time, so that you know how much cash you have in hand to make payroll, stock up on inventory, pay down debt, take advantage of supplier discounts, or whatever else your business may need.

In general, your cash flow statement is always going to have four main sections: operating activities, investing activities, financing activities, and supplemental information. The operating activities section converts your income statement from an accrual basis to cash, meaning that it shows you what you’ve actually received, rather than what you’re owed. This can be crucial information, especially if you have an abundance of unpaid customer invoices, or are dealing with customers who are slow to pay. This section also includes depreciation and gains and losses from long-term assets, and is the part of a statement that is often the most useful and eye-opening for small businesses.

Investing activities deals with the purchase and sale of long-term investments like property, buildings, equipment and fixtures, and vehicles. The financing activities section—which is more likely to be used by larger companies—deals with the payment of dividends as well as the issuing and repurchase of stocks and bonds. The supplemental information section covers just about everything that’s left over, from significant exchanges not involving cash to interest payments and taxes.

Generating and using cash flow statements can be a powerful tool for small business owners, helping you to see the day-to-day realities of your cash flow. But at the end of the day, knowing how much you have doesn’t necessarily help you to get more. Sometimes slow-paying clients, a delay in issuing invoices, or simply extending overly generous payment terms can lead to a need for fast access to business capital, and that’s where receivables factoring can come in handy. Receivables factoring lets you sell your unpaid client invoices to a third party—such as QC Capital Solutions—who will then advance you the cash that you need to keep your business running. Once you submit an invoice to QC Capital we will confirm it and then funds are typically advanced in one to two days. When the customer pays the invoiced amount, the reserves are then released to you.