Ever heard the saying “Cash is king”? There are many reasons businesses fail. Poor sales. Poor management. Poor marketing. But there is one reason that can be attributed to the overwhelming majority of business failures – poor cash flow.

What is a cash flow report?

A cash flow report is a statement that displays four key pieces of information:

• Cash balance at the start of the year
• Cash received during the year
• Cash spent during the year
• Cash balance at the end of the year

This information is necessary because it allows users to see how the company has been managing its cash position, and whether it has sufficient funds in the bank to meet its cash obligations as they become due. Profit and Loss statements can be misleading. In most cases accounting rules, sales are recognised even if payment hasn’t been received. Cash flow reports only recognise cash that has physically been received from customers and is at the company’s disposal. The key factor in staying solvent is receiving more cash than you spend, and this is exactly what a cash flow report determines. Hence the reason many stakeholders consider the cash flow report to be the most important report in a company’s financial statements. Discover how Colour Accounting™ can revolutionise the way you view and manage business finance. Learn how to tackle all the basics of business finance in just one day. No boring spreadsheets, no mind numbing big numbers. Financial literacy is all about words and structure. Learn more here.  ]]>