Not As Difficult As It Looks! Here's How To Make A Cash Flow Report Properly And Easily
YOGYAKARTA - Cash flow reports are one of the important components in financial reports that provide an overview of the flow of money in and out of companies over a certain period. This report is very useful for management, investors, and interested parties in assessing the company's financial health.
Understanding how to make correct cash flow reports is very important to ensure the right financial decisions. This article will discuss the steps you need to follow in making effective cash flow reports.
Getting To Know Cash Flow Reports
Cash flow reports are reports that describe cash flow in a certain period, both in the form of cash received (income) and cash disbursed (expension). This report helps the company to monitor the extent to which liquidity is maintained, which is an important indicator of business operational continuity. Cash flow reports are divided into three main parts:
Why Is Cash Flow Report Important?
Cash flow reports have various benefits, including:
The first step in making cash flow reports is to collect all relevant financial information. Make sure you have:
There are two main methods in making cash flow reports:
Both methods are equally legal, but many companies prefer indirect methods because it is easier to use if the data is not available directly.
The first part of the cash flow report is the cash flow of the operating activity. The steps to make it are:
Example: If the company has a net profit of Rp. 100,000,000, and there is an increase in receivables of Rp. 20,000,000, then you must reduce net profit by increasing the amount of receivables. This will provide an overview of the available cash from operational activities.
The second part of the cash flow report is investment activity. It includes buying and selling fixed assets, such as property, factories, and equipment. If the company buys new assets, it will be considered a cash expenditure, while if the company sells assets, it will be considered a cash receipt.
Example: If the company buys equipment worth IDR 50,000,000, it will become cash flow out of investment activity. On the other hand, if the company sells the old equipment for IDR 30,000,000, it will become an inflow of cash.
Funding activities include cash flows related to changes in capital and loans. If the company takes a new loan or removes shares, it will become cash revenue. On the other hand, if the company pays debts or dividends to shareholders, it will be cash expenditure.
For example: If the company issued a stake worth IDR 100,000,000 or received a new loan worth IDR 200,000,000, it would be cash inflow. However, if the company paid the debt or dividend, it would be cash outflow.
After recording all cash transactions for the three categories of activity, count the total net cash flow. This is the result of the sum of cash flow from operating, investing, and funding activities. If the result is positive, it means the company has more cash available; if it is negative, it means the company's cash is reduced.
Make sure all the numbers in your cash flow report are appropriate and accurate. Check whether the total cash available at the end of the period matches the cash balance recorded in the balance sheet. If there are differences, make adjustments and improvements.
How to make cash flow reports is very important to monitor the company's financial condition. With good cash flow reports, you can more easily manage your finances, find out the company's liquidity, and plan the right financial strategy. Make sure you follow the steps described above to make accurate and beneficial cash flow reports for better business decisions. In addition, also find out Tips for Making Efficient and Easy Openings for Every Business Owner
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