What is a cash flow statement and how does it help you track your cash flow

What is a cash flow statement?

The cash flow statement is a tool that shows all the actual cash movements in your business over a given period. It lists actual cash inflows and outflows, not simple accounting entries.

Unlike the profit and loss statement which displays theoretical profit, the cash flow statement answers a simple question: where does my money actually go?

It's an essential management tool for understanding your cash position and anticipating future needs.

The three categories of cash flow

To facilitate reading and analysis, the cash flow statement is divided into three main families of cash movements. This structure allows you to quickly understand where cash comes from and where it goes.

Each category reflects a different aspect of your financial management: day-to-day operations, investments and business financing.

Operating flows: cash from your daily activity

Operating flows include all movements related to your current activity: customer receipts, supplier payments, salaries, social charges, rent, insurance, VAT.

This is the heart of your cashflow. If your operating flows are positive, your activity generates cash. If they're negative, you're consuming cash.

It's the main indicator of your day-to-day financial health.

Investment flows: your equipment and asset purchases

This category includes outflows for purchasing equipment, vehicles, computers, premises or any other durable asset. It also includes any equipment sales.

These flows are generally one-off but strongly impact your cash flow in the month they occur. A 2,000 CHF computer represents an immediate outflow, even if it will be depreciated over several years for accounting purposes.

Financing flows: capital contributions, loans and dividends

Financing flows show how you finance your business: personal capital contributions, bank loans received, loan repayments, dividends paid to shareholders.

This section reveals your financing strategy. Positive flows indicate that you're injecting cash or borrowing. Negative flows show that you're repaying or distributing profits.

Why accounting profit doesn't reflect your cash flow

You can show a profit of 10,000 CHF on paper and have an empty bank account. Why? Because profit and available cash are two different things.

A 5,000 CHF invoice issued in December increases your profit, but if the client pays in February, your cash flow remains unchanged in December. Depreciation reduces your profit without any cash outflow. A purchase recorded but paid 60 days later doesn't immediately impact your cash.

The cash flow statement shows the reality of your bank account, not accounting theory.

How to build your cash flow statement

Creating your own cash flow statement doesn't require an accounting degree. You just need to follow a simple and structured method, accessible to all entrepreneurs.

Here are the practical steps to build an effective statement that will help you manage your cash flow on a daily basis.

Define the period and collect your data

Start with a short period: one month or one quarter. Gather your bank statements, your issued and received invoices, and your payment tracking table.

If you use BePaid, you already have payment tracking and exports that greatly facilitate this collection. Note the opening and closing bank balances to verify your calculations.

List all your cash inflows

Record all actual receipts: customer payments actually received (not invoices issued), personal contributions, bank loans received, equipment sales, refunds.

Important: only money that has actually arrived in your account counts. An invoice sent but not paid doesn't appear here. This is the fundamental difference from accounting turnover.

List all your cash outflows

Record all actual disbursements: supplier payments, salaries and social charges, rent, insurance, subscriptions, loan repayments, equipment purchases, VAT paid.

Again, only money that has actually gone out counts. A supplier invoice received but not yet paid doesn't appear in this period. Check your bank statements line by line.

Calculate your net cash flow

The formula is simple: Total inflows - Total outflows = Net cash flow.

If the result is positive, your cash flow has increased. If it's negative, it has decreased. To verify: Opening bank balance + Net flow = Closing bank balance. If it doesn't match, you've forgotten a movement or made a calculation error.

How to use your statement to manage your cash flow

A cash flow statement isn't just an accounting exercise. It's a decision-making tool that helps you anticipate, identify problems and act before it's too late.

Here's how to use it practically to improve your day-to-day financial management. To go further, consult our guide on cash flow management.

Identify your upcoming cash flow needs

By analysing your past flows, you can project future movements and anticipate tensions. Identify your monthly fixed charges and predictable receipts.

This projection reveals your cash flow requirement and necessary working capital. For an SME, planning 3 to 6 months ahead helps avoid unpleasant surprises and make decisions before urgency strikes.

Spot problems before they become critical

Certain warning signs should alert you: recurring negative operating flows, lengthening customer payment terms, growing gap between turnover and actual receipts.

If your operating flows are consistently negative, your business model is consuming cash. You need to act quickly. Discover the essential financial indicators to complete your analysis.

Make informed decisions

The cash flow statement helps you decide: postpone an investment if cash flow is tight, negotiate longer supplier payment terms, actively chase late-paying customers, adjust your customer credit policy.

BePaid's automated reminders reduce your collection times by systematically chasing unpaid invoices. Every day gained improves your cashflow.

Cash flow statement: which format to choose for your SME?

You don't need complex software to get started. Several options are available depending on your size, skills and needs.

The essential thing is to choose a format that you'll actually update regularly. A simple tool used every month is better than a sophisticated system abandoned after two weeks.

The simple and customisable Excel spreadsheet

Excel or Google Sheets remains a practical solution: flexible, free, adaptable to your specific needs. Create three sections (operating, investment, financing) and list your monthly flows.

The disadvantage: manual updating. You have to enter each movement. But for a small structure with few transactions, it's more than sufficient and you maintain total control.

Integrated management tools

Solutions like BePaid offer exports and payment tracking that facilitate statement creation. Bank reconciliation helps verify that all actual flows are properly recorded.

The advantage: data is already structured, you save time on collection. You can export your paid and unpaid invoices, then build your statement from this reliable data.

Common mistakes to avoid

Even with the best intentions, certain mistakes frequently recur when creating a cash flow statement. Knowing them allows you to avoid them.

Here are the most common pitfalls that distort analysis and reduce the usefulness of your management tool.

Confusing invoices issued with receipts

This is mistake number one. Only money actually received counts in the cash flow statement. A 5,000 CHF invoice issued in January but paid in March appears in March, not January.

Your accounting turnover and your receipts are two different things. The cash flow statement tracks cash, not accounting entries.

Forgetting non-operating flows

Don't neglect loan repayments, equipment purchases or personal contributions. These movements significantly impact your cash flow.

A monthly repayment of 1,000 CHF represents 12,000 CHF per year leaving your account. A 3,000 CHF computer purchase creates an immediate outflow. These flows must absolutely appear in your statement.

Not updating regularly

A statement created once then abandoned is useless. To remain an effective management tool, it must be updated at least monthly.

Block a fixed slot each month (for example the 5th of the following month) to update your data. This regularity transforms the statement from a one-off exercise into a genuine daily management tool.

Tips for improving your cash flow using the statement

Once problems are identified via your cash flow statement, you need to act. Here are practical actions to improve your cash position.

These strategies apply to all SMEs and sole traders. For additional advice, consult our article on how to avoid liquidity problems.

Reduce your collection times

The faster you collect, the better your cash flow. Use QR-invoices to facilitate payment, activate automated reminders, shorten your payment terms (15 days instead of 30), request deposits.

BePaid automates reminders and generates QR-invoices compliant with Swiss standards. Every day gained on your customer payment terms directly improves your cashflow.

Negotiate your supplier payment terms

Extending your supplier payment terms improves your working capital. If you pay your suppliers at 60 days instead of 30, you keep the cash longer.

Approach your regular suppliers professionally: explain your situation, propose regular payments in exchange for longer terms. Most prefer a reliable client who pays in 60 days to a client who pays late.

Build a cash reserve

Aim for a reserve equivalent to 2-3 months of fixed charges. This reserve protects you from unexpected events and seasonal variations.

Your cash flow statement helps you determine the necessary amount by identifying your average monthly charges. If your fixed charges are 5,000 CHF per month, aim for a reserve of 10,000 to 15,000 CHF to sleep soundly.

The cash flow statement is an essential tool for managing your business with peace of mind. It allows you to clearly visualise your actual cash inflows and outflows, beyond simple invoices issued. By distinguishing operating, investment and financing flows, you obtain a complete view of your financial situation.

The essential thing is to keep this statement updated regularly and use it as a basis for your strategic decisions. Identify your future needs, anticipate cash flow tensions and adjust your management accordingly. Don't forget: good turnover doesn't guarantee healthy cash flow if receipts are delayed.

To simplify your day-to-day cash flow tracking, BePaid helps you track your payments in real time and automate your reminders. You save time on administrative management and keep a constant eye on your receipts. Discover our free solution for up to 10 invoices per month.