How to Make a Cash Flow Statement

How to Make a Cash Flow Statement


In any company or organization, a statement is considered an important document. The word statement can be used to refer to a document which includes information about business matters, or any topic concerning a company.

Statement example in excel of cash flows, also known as cash flow statement or funds flow statement, is a financial statement which primarily displays the flow of cash (both inflow and outflow) of a company over a specified period of time. A cash flow statement helps the company’s auditor, or head to monitor how or where the company’s finances are being spent, and where the money earned by the company comes from.

Purpose of Cash Flow Statements

Any firm or company who wants to be successful needs to generate cash flow statements. This helps the owners monitor how the company’s finances flow in and out of the company, what factors affect such flow, and how it affects the company’s financial and overall health.

Without cash flow statements, company owners and other people concerned with the company (e.g. clients, investors, stock holders, etc.) cannot monitor how his/her company’s operations use and generate the company’s finances.

Being in the dark with regards to such matters may prove one’s incapability of running a business or a company.

Cash flow is one of the key components which help a company grow, expand, and develop. Keeping track of how it flows will let one know the patterns and changes it experiences from time to time, be it positive or negative. Being able to interpret such data can be used as an advantage to realizing the effective course of action to undertake in managing the company’s finances, especially when realizing smart goals of the business, which in turn would help secure the company’s success.

How to Prepare a Cash Flow Statement

Company owners rely much on cash flow statements, especially when identifying how healthy a company is, financially. In preparing cash flow statements, two methods are commonly known:

  • Direct method. This method directly derives information from the company’s operating activities, presenting cash receipts, and major payments (both received and payed). It is believed that direct method gives a clearer and more accurate picture of the company’s financial health, as well as its overall health.
  • Indirect method. Many companies prefer such method. This method involves interpreting data from income statements and balance sheets for a particular time period. It gives a different perspective as compared to the direct method since this also shows a company’s gains or loss over a specified time frame.

In order for you to prepare a statement example in pdf of cash flow for your company, you need to first understand how cash flow statements work, and how they are interpreted. You also need to have a basic know-how of your company’s finances. Of course, if you want to effectively prepare a cash flow statement, you might want to make sure that you know how to interpret other types of financial statements which would, in most cases, prove useful in preparing your cash flow statement.

Lastly, you also need to have a proper understanding of both methods mentioned above for you to be able to determine which method would be best-suited for your company.