Managing cash flow correctly requires you to have an intimate knowledge of what cash flow statements are and how they can guide your business. Fail to do so, and you might find yourself in hot water with the ATO. Worse, you may wind up needing to close your doors for good.

This blog will explore the ins and outs of preparing cash flow statements, including common examples, potential pitfalls, and how Marmalade can help.

Let’s start with the basics.

A cash flow statement is a key financial document that shows how much cash is flowing in and out of your business. The statement can be prepared on a monthly, quarterly, or yearly basis, and is generally used to monitor the health of your company.

There are three types of cash flows to keep in mind:

• Operating cash flow — This is the cash that flows in and out of your business as a result of day-to-day operations. It includes items like accounts receivable, accounts payable, inventory, and wages.
• Investing cash flow — This is the cash that flows in and out of your business as a result of investments, such as the purchase or sale of property, equipment, or stocks.
• Financing cash flow — This is the cash that flows in and out of your business as a result of financing activities, including the signing of loans, issuing stock, or repaying debt.

Monitoring cash flow statements is a large part of keeping your small business healthy and profitable. Since its primary purpose is to grant visibility into the health of a business, it should be consulted liberally on a regular basis.

For example, cash flow that is consistently in the green points to a business that has a strong understanding of where its finances are going. Cash flow with low or negative balances may suggest potential problems within the business or point toward inefficiencies somewhere else.

By tracking your inflows and outflows with a verified report, you can make informed decisions regarding your small business resources.

Statement of cash flows look different for every business. However, there will always be some elements that remain the same.

The most common cash flow statement templates contain:

• Specific months or a set timeframe
• A list of all expenses and their subcategories
• A list of all income and their subcategories
• A finalised total (specifically for the time period)
• Net cash movements showing how cash flow has changed

Check out this example below.

Of course, this is not the only format used to create cash flow reports. Other cash flow statement examples calculate free cash flow, price to cash ratio, and even profits and losses. However, these are neither required nor necessary to create an efficient cash flow statement.

There are many free templates online that provide more examples of what to expect from cash flow statements. Additionally, you can use specialised platforms to generate full reports in seconds. You may want to explore tools like Xero, which allow small businesses to create and download cash flow statements at scale.

It takes hard work to keep your profits in the green. Cash flow rarely improves on its own, and left alone for long enough, it may drain vital resources away from your company.

There are many reasons why small businesses run into cash flow problems, including:

• Invoicing inefficiencies — This occurs when businesses do not have a streamlined way to send, track, and receive payments. It may also lead to delays in payments, which can cause a snowball effect of late or unpaid invoices.
• Poor accounting practices — This is one of the most common issues among small businesses. Bad accounting makes it difficult to track the flow of money throughout your business. This can prevent your business from making ends meet, complicating your budget for future expenses.
• Late payments — Clients that fail to pay their invoices on time can be extraordinarily destructive to your small business cash flow. This is particularly common in service-based industries, where companies rely on a steady stream of payments to keep their lights on.

Many of these issues are difficult to rectify without the help of an outside platform. With Marmalade — a payments platform allowing businesses to cash-in unpaid invoices — these concerns can be easily corrected.

Marmalade's early invoice payment feature is an excellent example of this. we allow you to cash-in eligible invoices right when you need them. You only pay a fixed cash-in fee to access funds within 24 hours, and you never pay a cent in debt or subscription fees.

Cash flow doesn't have to be complicated. And with Marmalade, it's anything but.

Efficient cash flow management is paramount to success, yet difficult to manage as a small business owner. Even following all best practices, you may still find yourself struggling to keep up with demand; especially when customers and clients take too long to pay up.

With Marmalade, this no longer needs to be a necessary evil. Our world-first solution for unlocking your cash flow applies to brands at any stage of growth. With hundreds of happy customers all over Australia, Marmalade has become the cash flow solution for small businesses.

Our early invoice payment feature allows you to cash-in your eligible invoices in as little as 24 hours, giving you the power to manage your finances on your own terms.

Tap into the future of cash flow for your Australian-based business. Sign up for Marmalade and get started on solutions today. Go ahead — it's free.