Cash flow is a report that shows a company’s spending expenses called outflows and its sources of income or inflows. Some companies rely on this money statement to determine how well their operations generate a profit and predict potential revenue in the future.
THREE CASH ACTIVITIES CATEGORIES
Cash flow statements for corporate, companies, or small businesses are categorized into three:
- Operating – is the money amount the company receives and pays due to regular business activities, including sales, purchases, and amortization.
- Financing – is the movement of funds revolving around the company, owners, investors, and creditors.
- Investing – involves money acquiring and selling capital assets like factories, buildings, and land properties.
In doing cash flow analysis, owners or invoice makers of any business, big or small, always identify relationships between items and categories and are quantified through ratios and indicators used to evaluate business performance.
CASH FLOW ANALYSIS SOFTWARE
Because of the current global pandemic situation, the best accounting software for small businesses that can support proper cash flow analysis is essential for a company to keep running. It is critical nowadays to have an application that provides an accurate and fair representation of financial activities that can help in predicting upcoming revenues and make the best budget plans for a company in the middle of a market slowdown. Since most companies and businesses have shifted to online and work from home operations, thus making cash flow statements through one’s desktop is ideal as it meets the new health protocols due to the pandemic. Although it may be a little weird to handle a company’s money without face-to-face transactions, accounting software offers accuracy and another means of storing and keeping money transaction proofs.
To know more about cash flow analysis and how a small business should do it, you can read this infographic from Kippin It Simple.