What is the Cash Flow Statement for?
It answers the question of where your money is when your Profit and Loss shows a profit. Profit is what you earned, while cash is what arrived in the bank. This statement shows the difference line by line, helping you see if a profitable business is running out of cash.
How do I open the statement and check the badge?
- In the sidebar under Reports, press Cash Flow.
- Look at the top right for the badge status.
- A green Balanced badge means opening cash plus net change equals closing cash.
- A red Not balanced badge means a balance-sheet account could not be classified or methods disagree.
- Check the year printed under the title, which is the current financial year.
How do I compare the direct and indirect methods?
- Use the switch above the statement to choose Direct method or Indirect method.
- Direct method groups cash-book receipts and payments into operating, investing, and financing activities.
- Indirect method starts with profit and adjusts for non-cash items and working-capital movements.
- The badge is green only when the direct method reconciles to the cash book and both methods produce the same net cash movement.
How do I read the operating section?
- Start at Profit Before Tax, which is the net profit from the Profit and Loss for the same year.
- Read Add: Depreciation, which is added back because it is an expense that did not take cash away.
- Read Change in Debtors, which is negative if customers owe you more than at the start of the year.
- Read Change in Stock, which is negative if money was spent filling shelves.
- Read Change in Creditors, which is positive if you owe suppliers more and kept cash longer.
- Read Net Cash from Operations, which is the cash the trading itself actually produced.
How do I read investing and financing activities?
- Under Investing Activities, read Capital Expenditure, which is the cost of fixed assets recorded in the Assets register.
- Under Financing Activities, read Capital, which is money the owner put in or took out.
- Read Loan, where a loan received increases it and repayment reduces it.
- Read Withdrawal, which is money the owner took out for personal use.
- Read Net Change in Cash, then Opening Cash and Closing Cash underneath.
How do I use it to explain missing profit?
- Note the net profit at the top and the Net Cash from Operations further down.
- Work down the adjustment lines to find the biggest negative one.
- A large negative Change in Debtors sends you to Reports, Receivables aging.
- A large negative Change in Stock sends you to the Stock screen.
- A large Capital Expenditure or Loan repayment means the cash turned into an asset or paid down a debt.
What this does to your books
Nothing is posted from this screen and nothing can be typed in or edited. Every figure is calculated from the same postings behind every other statement, so a wrong figure is fixed upstream.