Three Reasons Why Cash Flow Statements are Important to Business Owners

Three Reasons Why Cash Flow Statements are Important to Business Owners

A Cash Flow Statement is a financial statement used to report a company’s source and use of cash. Sources of cash are called cash inflows, while monies used are called cash outflows.

A cash inflow can be described as money flowing into the company.

Examples of cash inflows include:

  • Capital investment
  • Sales
  • Dividends
  • Interest

On the other hand, a cash outflow can be described as money flowing out of the company.

Examples of cash outflows include:

  • Equipment purchases
  • Loan payments
  • Salaries
  • Taxes

There are three very important reasons why a cash flow statements are important to business owners:

  1. Assist business owners in making informed decisions. You will be able to determine which department in your company, for example, was the most profitable. Or even whether a specific product line’s sales have increased over a period of time.
  2. Tell investors whether they should invest their money into your company. Once your cash inflows are greater than your cash outflows, it will place you in a better position to receive funding.
  3. Demonstrate your are accountable. By producing financial reports on a regular basis, it shows you are committed to conducting your financial practices in an ethical manner. There’s nothing to hide!

Make it a priority to produce your financial statements on a regular basis.  This practice will benefit you, the business owner, in the long run.

Astrape Finance

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