Why Your Cash Flow Statement Is Your Most Important Financial Statement

Cash is the lifeblood of your business - which is why the cash flow statement is the most important financial statement to generate and study.


Without cash, your bills don't get paid, there's no new inventory coming in and you won't be getting paid either. Without good cash flow, your business doesn't have a secure future.

 Not The Whole Picture
Yes, there are plenty of other important accounting statements that you may find helpful in running your business. Maybe you're working with income reports and are keeping an eye on accounts payable and receivable. Those statements still won't be giving you the whole picture.

 Missing Data
Here are a few key pieces of data you may be missing without a cash flow statement:
  • How much cash you have available to pay suppliers, bills or invest into business upgrades.
  • How much money is tied up in the company and can't be used for the day-to-day operations.
  • How many of your customers have actually paid for the products and services they ordered.
  • You may have a lot of net worth, but without adequate cash flow, your business could be in trouble.
  • A cash flow statement will show you trends and fluctuations you may miss when looking at a regular income statement.
  • Without a cash flow statement, you don't know how liquid your business is.
  • How quickly you are seeing a return on your investments and projects.
  • You're not getting a complete picture of your company's financial health.
  • You don't know how much money you can safely take out of the business to pay yourself.
  • You don't know how quickly inventory turns over or how quickly new projects generate cash for the business.
Vital Information
As you can see, a cash flow statement is a vital piece of data for your company and a good tool to have in your belt. If you don't already have one in place, talk to your accountant or bookkeeper today. At minimum, you can check for templates online to start tracking the cash coming in and out of your business each month.

Both investors and financial institutions will likely ask for cash flow statements should you need to raise extra capitol to grow your business in the future.

If you already have a monthly cash flow statement, start paying attention to the information contained in it. Use it to your advantage and make adjustments to ensure your company remains both liquid and growing for years to come.

Still Confused?
Please don't hesitate to give Triple Play Tax Services a call at (902) 825-3307. We are well equipped to handle all of your cash flow management questions.

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