Where you do start when you want to figure out a cash balance? You begin with your business’s total cash balance at the start of a quarter or chosen period, which you can find either at the end of the previous Cash Flow Statement, or from the Balance Sheet if that is not available. All of theses statements complement each other and go into a company’s Financial Reporting. So while Balance Sheets and Income Statements are very useful for analysts and CPAs to understand the Financial Standing or operational health of a company, they do not explain or take into account in intricacies of cash flows over time. Since 1987 the Cash flow Statement has been a requirement of publicly traded companies. For small businesses this should be prepared quite frequently. This financial statement can as simple as a one page analysis or it can involve several schedules ( Quarterly, Monthly, Weekly, or Daily ) that supply information into a central statement. It is used to track the flow of funds or working capital into and out of an organization during a specific accounting period.
Why is this important you may ask? A Statement of Cash Flows or sometimes called Cash Flow Statement (CFS) is one of the most essential financial statements for any business or project. That is why many accounting and CFO consulting firms, will offer cash flow and liquidity analysis as a service to companies. The bottom is that “preserving cash flow” is the number one priority of most CFOs.