Cash flow statement to understand your business's financial health

Be on top of the cash flows that come in and go out of your business and evaluate where you stand in the path of your success. Stop spending time in preparing your cash flow statement with a single click generation and start analysing your business performance peacefully!

How does Gofrugal help in managing your cash flow?

Gofrugal's integrated accounting software is spread across every branch of accounting for a business, especially for Retailers, Restaurateurs and Distributors. Gofrugal aims in making business grow along with them. So, all type of financial reports especially growth infused reports are generated within the software with the POS data eliminating the need of manual intervention and process. Gofrugal AccountsEasy lets you experience the below perks in cash flow statement to provide you with impactful insights for your business

Summarised and detailed cash flow statement, both group wise and ledger wise

Forecasts cash flows with a single click of projected cash flow report

Eliminates the need for maintaining multiple software with direct POS integrated accounting module

Benefits of statement of cash flows

Measure cash profits

Track cash flow from operating, investing and financing activities, to understand the source and the application of your cash flows

Predict future

Analyse trends in cash flow movement to predict your future cash flows so that the owner can be prepared for the working capital to be brought into the business

Monitor liquidity

Understand the liquidity position of the business, so that business is insured against the perils of uncertainty when outflows have to be managed without sufficient inflows

How to generate cash flow statements?

A cash flow statement generated in the direct method involves the complete cash transactions made for a period. The cash transactions include all receipts and payments made of cash and cash equivalents. Then summarizing each transactions into category and arriving at the final number. In fact, cash flow is actually calculated by finding the difference in opening and closing balances of cash and cash equivalents.

Step 1: Login to Gofrugal ERP and open the integrated accounting software AccountsEasy

Step 2: Open the reports and select cash flow statement. We can find the statement of cash inflows and outflows for any given financial period with the category of transaction

That's it. It as easy as opening a document. Once the report is opened, the transactions made in the ERP and accounting software are listed automatically in the cash flow statement in a consolidated manner. This shows the exact flow of cash inside the business.

What is a cash flow statement?

Cash flow statement is a branch of financial statement which shows the wealth of the company with a detailed cash flow movement in and out of the business. Cash flow is the fuel for any businesses, which makes the businesses run vigorously with the fund flow forecast, that builds strong confidence in the management.

Why is cash flow statement important?

Cash profit is more relevant than book profit, which defines the real health of a business for a sustainable future. For a business to be healthy, its wealth should be strong, which in turn can be analysed and forecast with the cash flow statement. A business with a consistent cash flow in their business can only survive. Even if they have hefty loans, cash flow inside their business helps them pay their debts, manage their expenses and invest in other ventures to make more profits.

Format of a cash flow statement

As per the cash flow statement definition mentioned above, the format of cash flow statement is comprised of three main sections: Operating activities, Investing, and Financing activities.

Operating Activities

Flow of cash in and out because of operational activities for the running of business falls under this category. This tracks the flow of cash from the regular activity of the business which brings in the major money by selling the products or services.

Investing Activities

Flow of cash in and out because of investment that the company makes in equipment, assets or investing in other companies. Also, capital expenditure made in expanding the business over lands, buildings for future operations falls under investing activities.

Financing Activities

Flow of cash in because of the financial investments made into the business by investors, bank, equity etc., and out flow of cash by paying to investors, debts, and dividends.

Methods of cash flow statements

The cash flow of a business can be arrived by two different methods. Each method is not tiring to the other. Both solve the same purpose of finding the flow of cash but the mode of calculation varies.

Direct cash flow method

A cash flow statement generated in the direct method involves the complete cash transactions made for a period. The cash transactions include all receipts and payments made of cash and cash equivalents. Then summarizing each transactions into category and arriving at the final number. In fact, cash flow is actually calculated by finding the difference in opening and closing balances of cash and cash equivalents.

Indirect cash flow method

Cash flow statement generated from indirect cash flow method starts where the Profit and loss statement (P&L) ends, beginning from the "Net profit as per P&L" as the first line item. Then adjusting for non cash, non operating transactions and working capital changes to calculate the cash generated from operations. Indirect cash flow method categorized the summary of transactions in three different categories - Operating activities, Investing activities and financing activities as mentioned above. Depending on the type of transaction made, it should be added under the relevant category and should be adjusted.

The major difference between direct and indirect cash flow is indirect cash flow summarizes both cash and non cash transactions in a detailed level. Whereas direct cash flow summaries cash transactions and arrives at the conclusion of what has happened in between opening and closing balance.

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Cash and cash equivalents in cash flow statement?

Cash and cash equivalents are the part of the balance sheet which determines the value of the company considering the assets which are the form of liquid cash. Cash is the currency that comes into a company through transactions. Cash equivalents include commercial paper, marketable securities, short term government bonds and short term bank deposits

Examples of Cash Flow Statements

From this cash flow statement, we can infer that the net cash flow for the financial year 2021-2022 is ₹6,13,000. When we look into the cash flow from operations, we can clearly see the company is pumping in good value of money which in turn made their cash flow from operations to be in a positive side.

Generating more money from their operations made them invest in the equipment. Since they have made a huge investment in equipment that help them increase more profits in the future, their cash flow from investing falls in the negative zone.

Last comes the cash flow from financing. They have brought new investments from a bank, yet they paid back some of the money to their investors which made the net cash flow from financing activities positive. By summarizing the cash flow from these categories it's clear they have made a good turnover in the financial year and plenty of cash flow in the business.

How to forecast and manage cash flow?

A cash flow statement is a financial instrument that helps in analysing the flow of cash in the organization. In order to forecast a cash flow in an organization, there are various ways to arrive it. One such way is listing all the transactions, grouping them and summarizing them to arrive a final cash flow. Other is getting the cash flow for a period in a single click. The first one is the traditional way of forecasting that requires a lot of time. The second one is the way of generating using Gofrugal. As you know it happens in a matter of seconds! Forecasting cash flow is the biggest part, yet analysing, managing and improving it is the most essential and real purpose for a cash flow statement generation. By forecasting the cash flow statement, the following metrics can be monitored and improved in order to increase the flow of cash in the business.

1. Bring in your money that customers owe
Identify the money that you earned from your customers but to be brought in your hand with the cash flow statement and send them a follow-up email/reminder with their outstanding statement.

2. Cut the costs that sleeps in your inventory
Easily forecast the money that sits in your inventory as dormant item and start selling it as combos or offers and avoid overstocking of non moving items by forecasting your inventory. This can be easily found if the operating expense exceeds the flow of cash (sales) into the organization.

Gofrugal cash flow statement at a glance!

These are the flow of things that need to be known to understand the flow of cash in your business. yet, here is the summary on how Gofrugal is best in cash flow and makes you go with the flow in your business.

Flow of cash in and out under each category can be drilled and narrowed till group wise and ledger wise

Month wise summary can be arrived directly from the analysis of cash flow for a period of year

Comparing balance sheet and income statement can be seized as cash flow statement collects it all without any intervention

Experience + Gofrugal = Delight

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We are sure you will be convinced about MIS and, importantly, Gofrugal's MIS automation. To make it easier for you, click on the link below and you get a FREE trial of Gofrugal ERP and other apps for a full month. Now this is one insight you surely don’t want to miss!