CHASE - CREDITCARDS

How To Prepare Your Statement Of Cash Flows

You can use the cash flow statement to record sales revenues received and expenses paid during the month. When you have accumulated a year or more of this information, you can project next year's, or next month's cash needs. These projections will help you identify the amount and timing of cash shortfalls. Then you can use this schedule to plan for loans to cover your cash needs, and when the money will be available to repay the loans.

There are four basic steps to prepare a statement of cash flows. These steps will take some time on your part and may require assistance from your accountant.

Step 1.   List and date cash inflows from all sources, including any income from loans or equity investments.

Step 2.   List the timing and amounts of the different cash flows out of your business. Separate fixed payments such as rent or payroll, from variable expenses such as inventory or advertising. Remember that your expenses may be constant, but your cash outflows may not be. For example, insurance premiums of $1,200 per year equate to $100 per month, but you may actually "disburse" the cash quarterly in $300 installments.

Step 3.   Look for patterns in your cash flows. You will benefit most from the analysis of the cash flow statement. For example, if your business is seasonal, you may want to reschedule some items, such as insurance premiums, to even out your cash flow.

Step 4.   Establish reporting systems (preferably computerized) and management controls. Your cash flow statement is only helpful if you use it to make your business more profitable and efficient.

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