Why do you need a cash flow statement?

I’m Ella Rivkin, Financial Planner with 20+ years of experience in accounting and taxation. Today I will share with you why you need a cash flow statement and how to use cash flow in your business.

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HIGHLIGHTS:
00:50 How to use financial statements
02:22 What can you get from a cash flow statement?
04:25 Are you a business owner?

TRANSCRIPT:
Today we're talking about cash flow. What is a cash flow statement? A cash flow statement is the one statement that you really cannot do without! I will explain to you throughout the presentation why it's important and you will see and understand. The cash flow statement summarizes the amount of cash coming in and out of your business account. It's the amount of money of that flows and moves through the business account. The cash flow statement is a financial statement that will complement the balance sheet statement and the most common nonprofit and loss statement or the income statement. So, a lot of accountants and probably whenever you speak to your accountants, you ask for the profit and loss statement, because everybody wants to know if the business is profitable or if it's not. And then also, with the profit and loss statement you probably look at the balance sheet to see how much is the end in cash, how much at the assets and the liabilities...

Having a profitable business or having all these assets on the account is one great thing but then also you cannot operate business if you don't have cash. How are you going to pay your employees? How are you going to make your rent payments or pay your suppliers? So, that's why knowing how much cash you have and having this excess cash, having the cash on your savings account or your emergency fund will protect you from being insolvent or from even filing a bankruptcy. So now that we have identified the benefits of the cash flow statement, I hope now you understand why it's essential to have the cash flow statement, to know how to prepare one, or if you have accountants but be able to actually read cash flow statements and together with your profit and loss statement and the balance sheet, and use this to make any financial decisions in your business.
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