What Is a Cash Flow Statement?
A cash flow statement is the report of cash that came into and went out of a business over a period, split into operating, investing and financing activities. It explains why your bank balance changed and why that change differs from profit. A 13 week cash flow is a forward-looking version, not a historical statement.
What is a cash flow statement?
It is one of the three main financial statements, alongside the profit and loss statement and the balance sheet. It starts with the cash you had at the beginning of the period, adds and subtracts the cash movements, and ends with the cash you had at the end. That closing figure should match the cash on your balance sheet and your bank accounts.
Its value is explanation. Profit tells you whether you earned more than you spent. The cash flow statement tells you what actually happened to the money, including the things profit leaves out: loan repayments, equipment purchases, owner draws, and the effect of customers paying late.
What are the three sections?
| Section | What it covers | Typical items |
|---|---|---|
| Operating activities | Cash from running the business day to day | Customer receipts, supplier and payroll payments, taxes, interest paid (under US accounting rules) |
| Investing activities | Cash spent on or received from long-term assets | Buying equipment or vehicles, selling an asset |
| Financing activities | Cash from owners and lenders | New loans, loan principal repayments, owner contributions and draws |
The three sections add up to the net change in cash for the period.
One common pattern for an established business is positive cash from operations, some spending on investing, and financing that reflects deliberate choices about debt and owner draws. A business that only stays afloat because of new loans or owner top-ups has a different story, and the statement shows it.
Direct vs indirect method
There are two ways to prepare the operating section.
- Direct method: lists actual cash receipts and payments (cash from customers, cash paid to suppliers). It is easy to understand.
- Indirect method: starts with net profit and adjusts for non-cash items (such as depreciation) and for changes in receivables, payables and stock. It is the more common one, because it shows exactly how profit turns into cash.
Accounting software that offers a cash flow statement usually produces the indirect version. If you want to see why the two differ, see profit vs cash flow.
Profit and loss vs cash flow statement
| Item | Profit and loss | Cash flow statement |
|---|---|---|
| Counts income when | Earned | Money is received |
| Counts costs when | Incurred | Money is paid |
| Includes depreciation | Yes, as a cost | No, it is added back |
| Includes loan principal | No | Yes, as cash out |
| Answers | Did we earn more than we spent? | Where did the cash go? |
Reading the profit and loss statement first, then the cash flow statement, usually answers the question "why am I profitable but short of cash?" See how to read a profit and loss statement and how to read a balance sheet.
A simple example
The numbers are invented to show the flow.
Example (illustrative numbers only): one month for a small business, indirect method.
| Line | Amount |
|---|---|
| Net profit | 12,000 |
| Add back depreciation (non-cash) | 1,000 |
| Increase in accounts receivable (customers owe more) | minus 7,000 |
| Increase in stock | minus 3,000 |
| Increase in accounts payable (bills owed to suppliers) | plus 2,000 |
| Cash from operations | 5,000 |
| Equipment purchased | minus 6,000 |
| Cash from investing | minus 6,000 |
| Loan principal repaid | minus 2,000 |
| Owner draw | minus 3,000 |
| Cash from financing | minus 5,000 |
| Net change in cash | minus 6,000 |
In this example the business earned a good profit and still saw its cash fall. The statement shows why: money went into receivables and stock, an equipment purchase and loan and owner payments.
What is a 13 week cash flow statement?
People searching for a "13 week cash flow statement" are usually looking for a forecast, not the historical statement above. A 13 week cash flow is a forward-looking schedule of expected cash receipts and payments, week by week, for roughly one quarter ahead. It is often used when cash is tight, when a lender wants to see short-term planning, or when a business is recovering from a difficult period.
A basic layout looks like this:
| Row | Week 1 | Week 2 | Week 3 | Continue to the final week |
|---|---|---|---|---|
| Opening cash | ||||
| Cash in: customer payments | ||||
| Cash in: other (loans, deposits) | ||||
| Cash out: payroll | ||||
| Cash out: suppliers | ||||
| Cash out: rent, utilities, loan payments | ||||
| Cash out: taxes and other | ||||
| Net cash movement | ||||
| Closing cash |
Each week's closing cash becomes the next week's opening cash. You update the actuals each week and roll the forecast forward. The value lies in spotting a shortfall weeks before it arrives.
Cash flow forecast vs cash flow statement
The cash flow statement looks back at what happened. A cash flow forecast looks forward at what you expect. They use the same structure, so the habit of reading one helps with the other. The forecast depends on assumptions, such as when customers will really pay, so check it against actuals and adjust.
How do I use the statement in practice?
- Make sure the books are reconciled first. Cash that does not match the bank makes the statement meaningless.
- Read the three section totals before the details.
- Look at operating cash over several months. It should broadly follow profit over time.
- Ask what is absorbing cash: receivables, stock, equipment, debt.
- Compare with budget vs actual to see if the cash outcome matches the plan.
- If cash is tight, consider a short-term weekly forecast.
When is this not worth paying for?
If you run a simple business with steady customers paying promptly and little stock or debt, the bank balance and profit and loss statement may be all you need. A formal cash flow statement or forecast pays off when you have late-paying customers, stock, loans, seasonal swings or big planned purchases.
Cash management and cash-flow monitoring are part of the fractional controller service, in particular cash management. Forecasting and scenario planning are part of the fractional CFO service. The records underneath come from bookkeeping, which we can do in QuickBooks or Xero. English Oak's starting prices are $1,500 a month for controller work and $2,500 for CFO work, custom and one fixed monthly fee; see pricing and what we do.
This is general information, not tax or investment advice. English Oak does not prepare tax returns, audit or give investment advice.
Need this done for you? See our Fractional Financial Controller service, or pricing. English Oak Financial does not prepare tax returns, perform audits or give investment advice. This guide is general information, not tax, legal or investment advice.
Related pages
Common questions
What is the purpose of a cash flow statement?
It explains why the cash balance changed over a period, by showing the cash movements from operations, investing and financing. It also shows why cash differs from profit.
What is the difference between income vs cash flow statement?
The income statement, or profit and loss statement, shows earnings, counting income and costs when earned and incurred. The cash flow statement shows only actual cash movements.
What is a 13 week cash flow statement template?
It is a weekly schedule of expected cash in and cash out for the next thirteen weeks, with opening and closing cash in each column. The layout above can be copied into a spreadsheet.
What is the difference between a cash flow forecast and a cash flow statement?
A statement reports what happened. A forecast estimates what will happen. The forecast relies on assumptions and needs regular updating.
Do small businesses need a cash flow statement?
Many benefit from one, especially when customers pay slowly or the business is growing. Smaller, simpler businesses may rely on the bank balance and profit and loss statement.
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