124 Summer School Session 3: Cash Flow Statement for Small Business

You could be totally profitable on paper... and still feel like you're scraping by every single month. Sound familiar? That's exactly what we're digging into today! In this Summer School session, we're breaking down the cash flow statement (the report a lot of small business owners skip right over) and why that's a problem. By the end, you'll finally understand why your profit and your bank account don't always match, and what you can actually do about it. What We Cover What is the cash flow statement? Profit is what you've earned. Cash is what's actually sitting in your bank account. Those two numbers are often not the same, and the cash flow statement is what helps explain the difference. Why your profit and cash might not match: You billed a client but they haven't paid yet (hello, unpaid invoices!) You made a loan payment, but that cash is gone and it doesn't show up as an expense on your P&L You bought a big piece of equipment or a lot of inventory all at once, and recorded it as an asset instead of an expense The three sections of the cash flow statement: Operating activities: cash from the day-to-day running of your business Investing activities: cash spent on bigger purchases like equipment or long-term assets Financing activities: cash tied to loans, owner draws, contributions, and debt payments (Don't panic if you don't have an investing activities section. That's totally normal for newer or online-based businesses!) Cash basis vs. accrual basis: The gap between your profit and your cash can also depend on which method you use to record your books. If you're not sure what that means, go back to episode 67 where we break down the number one QuickBooks setting that most people miss. Do you really need this report if you already look at your P&L and balance sheet? Yes! The cash flow statement tells a story the other two can't. You can be profitable and asset-rich and still run out of cash if the timing is off. Common Questions Answered "My P&L says I made money, so why is my bank account so low?" Timing! Unpaid invoices, loan payments, and big purchases all hit your cash differently than they show up on your P&L. Profit and cash are not the same thing, and that's okay. "Is a slow cash month always a bad sign?" Not necessarily, but it is a warning sign. One slow month might not be a big deal. If it keeps happening, that's your cue to pay closer attention to your cash flow statement (and maybe even look into a cash flow management system). "Is cash flow the same thing as a budget?" Nope! Your cash flow statement shows what already happened. A budget is a prediction of what's going to happen. But they can work together and you can create cash flow forecasts to plan ahead. Resources Mentioned Episode 67: The #1 QuickBooks setting that gets missed (cash vs. accrual basis) Recent guest episode with Emily: How to manage cash flow and what it means for your taxes Free curated podcast playlist: Find out exactly where you are in your bookkeeping journey:  https://erikamillard.com/podcast-playlist-bundles Happy Bookkeeping!