Cash Flow Analysis


assets and liabilities

Cash Flow Analysis

Tuesday, November 30th, 2021

Running a small business successfully requires that you know where you stand financially at any point in time. You need to have solid projections for future expenses and income, and you need a clear picture of how much available cash you have on hand. A cash flow analysis gives you the current and accurate information about your assets and liabilities that will help you plan for a successful business.

Clarifying the Accounting Terms

The first thing that’s helpful to know is the meaning of these terms, when you are reviewing your assets and liabilities and generating a cash flow analysis. An asset is something that your company owns that holds value. It can be inventory or equipment, but it can also be a nonphysical asset such as a trademark or patent.

Your company’s current assets are the sum of cash and cash equivalents that can be converted to cash in less than one year. Examples of current assets include inventory, accounts receivable, prepaid expenses, and marketable securities.

Liabilities are the obligations that your business owes to suppliers, vendors, and lenders. Your current liabilities include the sum of all money your company owes that is due with one year.

Your cash flow statement shows the timing of all cash going in and out of your business during a specific period of time. You can use the statement to better understand your cash position, which is the amount of cash you have available for use in your business.

Cash Flow Statement

A cash flow statement measures how well your business manages its cash position. To run a successful business, you will need to understand how well the company generates cash to pay its debts and fund its operating expenses. The main components of the statement are cash from operating activities, investing activities, and financing activities.

To use the Cash Flow Statement:

  • Enter the starting balance, the cash on hand from your balance sheet
  • Enter the amount and time that cash came into your business
  • Enter the amount and time when cash went out of your business
  • Subtract the amount of outgoing cash from the amount of incoming cash.

The result is your cash position. Reviewing this information on a regular basis gives you a better picture of your cash flow.

Cash Flow Analysis

Running short of cash is one of the most common causes of failure for a small business. When you conduct a cash flow analysis on a regular basis, such as monthly, you will know what your cash position is at any point in time. The cash flow analysis gives you a clear picture of your company’s financial health. When you find concerns, you can take steps to resolve them to keep your business financially solvent and successful.

Regular performing a cash flow analysis is key to knowing whether you have enough cash on hand to make payroll, pay suppliers, buy materials, or move forward with expansion plans. One thing to keep in mind while analyzing your cash position is to understand that a lot of cash on hand doesn’t necessarily translate to being a profitable business. Along the same lines, even though you may have strong profit margins, you will still need available cash to pay your bills.

Analysis Results and Actions

As you perform the cash flow analysis on a regular basis, you will begin to see patterns in your cash flow. If you find that you are running short of cash at certain points of time, you can use that information to look for ways to cut costs or increase your income. You may even need to consider short-term financing to cover your immediate debts. On the other hand, if you have extra cash, you might consider investing or putting it aside to cover expenses during anticipated future slow periods in your business operations.


Maintaining and interpreting your company’s financial information is critical for making sound business decisions. The professionals at Clear View understand what it takes to maintain accurate, helpful financial records. We will work with you to help ensure your financial records are in good shape so you can better understand your current status and plan for a successful future. Learn more about how we can help you and your business by contacting Clear View Business Solutions to speak to our team about our services. Give us a call at (520) 544-0177.