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  • Writer's pictureShane Glavin

7 Reasons It’s Important to Get to Know Your Cash Flow Statement Better

A computer screen with an open statement of cash flows document and a calculator that says "CASHFLOW" on the screen.

Your cash flow statement, which itemizes your cash coming in and going out of your business in a particular time period, is an important part of your financial reporting. While you may find it useful for documenting the activities of your business, there are many more ways in which it serves your company.

Here are seven reasons why your cash flow statement is a critical tool for your business:

  1. You get in-depth insight into your spending activities. Is there a debt repayment that is putting a drag on growth? Or maybe you will notice that office supplies are ramping up in price and decide you want to look into the reasons behind the change.

  2. See where your cash planning paid off. You’ve decided to cut some expenses or invest a little more in a particular area. Your cash flow statement allows you to see how your plans are coming together.

  3. Get a sense of your cash balance. Whether you have too much cash on hand that could be better used in an investment, or you are continually experiencing a deficit, the cash flow statement helps you determine your optimal cash on hand.

  4. Develop a plan to increase inflow. By becoming intimately familiar with your cash flow statement, you may be able to identify areas where your cash inflow could be improved. For instance, if inventory purchases are not as efficient as they could be, this may be an area where you want to focus energy to tighten up operations.

  5. Get an insightful long-term view. Your cash flow statements, particularly over time, will help you identify trends and make adjustments for capital investments, paying off debts and more. It also signals to investors whether you make changes based on your financial reporting if they can see your cash flow statement being optimized over time.

  6. Tighten up short-term goals. From paying invoices and payroll to daily operating costs, your cash flow statement allows you to determine whether you can stay solvent and meet short-term obligations. 

  7. Prepare for a crisis. Understanding your cash flow can help predict and plan for a shortage of funds in the future, mitigating the impact to your business.

There’s Just One Problem. You’re already short on time, so the thought of dedicating extra time to your cash flow statement isn’t all that appealing and you really don’t have that kind of time. This is where The Power CFO comes in. We produce accurate, timely financial reporting services, then we streamline things even further by including the insights that matter to your business. This can have a great impact on your business both now and for the future. Contact us to learn more about the benefits of outsourcing your financial reporting.


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