How To Prepare A Cash Flow Statement Step By Step Cash Management – How to Prepare a Daily Cash Position Report – Part 1

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Cash Management – How to Prepare a Daily Cash Position Report – Part 1

As I mentioned earlier, the cash flow statement is a very important report that any business owner or entrepreneur must know how to analyze in order to plan their next step in business. Almost all business gurus and academics stress the importance of preparing a cash flow statement, but unfortunately none of them provide specific guidance on how to prepare one. The cash flow report that we have mentioned here is a dynamic cash flow report that will show us the cash balance at any given time and at the same time it can act as a powerful tool that allows us to earn as much money as possible by investing the surplus fund in a very short term investment such as placement on the money market. The cash flow statement recommended by every accounting textbook is a cash flow statement generated from the balance sheet and income statement and will provide an in-depth analysis of the net cash flow recorded from operating, investing or financing activities.

First and foremost, if we only have one bank, the beginning balance of our cash for that month must be the ending balance for the previous month. This can be derived from the Balance Sheet section under Current Assets which will list the closing bank balance for the previous month. If for any reason a company could not produce their company accounts, such as a profit and loss account and a balance sheet due to the size of the company, they can get the closing balance from their cash book as this is the basic information they need to prepare if they have not yet established an accounting system for your business.

If you have only one bank for your business, it is advisable to prepare the payment according to the payment categories in the cash flow statement. For example, if you have decided that your payment categories are for paying taxes, utility bills, subcontractors, suppliers, petty cash and other, you should organize all your invoices and receipts according to their categories. After you start preparing the payout, you should print the checks according to their serial number. For example, if your check starts at 000001, and you intend to prepare 20 checks to pay suppliers, the serial number for the prepared checks must be from 000001 to 000020. After that, if you want to prepare 10 checks for subcontractors, the serial numbers should be from 000021 to 000030. You can continue to use the same technique for other payments. Whether you prepare the payment manually or using a special printed check, you should follow the same technique.

The same concept applies when we receive incoming checks from your clients and customers. Following the same technique, if you have some large clients that typically account for almost 80% of your revenue, we recommend that you sort all of your major clients into their own revenue categories. Other income which usually consists of about 20% of your income, you can simply list it under other categories.

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