Cash flow statement template
A cash flow statement explains how your cash balance changed over the year: how much cash the business generated from trading, what it spent on assets, and what came in or went out through loans, shares and dividends. This free Excel template uses the indirect method, starting from operating profit, which is how most UK companies present it.
Running a company of 30 to 200 people? Documents like this are now worth money.
It looks back at what happened. For a forward-looking plan of cash in and out, use the cash flow forecast template instead.
What's in the template
Two sheets: the statement to fill in, and an example for a fictional 70-person wholesaler. The same company appears in our balance sheet template, so the closing cash ties to its balance sheet. A check line at the bottom compares your closing cash with your balance sheet. The example:
| Year ended 31 December | Amount |
|---|---|
| Operating profit | 196,000 |
| Add back depreciation and amortisation | 52,000 |
| Increase in stock | -41,000 |
| Increase in debtors | -60,000 |
| Increase in creditors | 42,000 |
| Cash generated from operations | 189,000 |
| Interest and corporation tax paid | -51,000 |
| Net cash from operating activities | 138,000 |
| Net cash from investing activities | -33,000 |
| Net cash from financing activities | -64,000 |
| Net increase in cash | 41,000 |
| Cash at the start of the year | 163,000 |
| Cash at the end of the year | 204,000 |
How the indirect method works
- Start with operating profit from the P&L.
- Add back costs that weren't cash, chiefly depreciation and amortisation.
- Adjust for working capital. More stock or more money owed by customers means cash tied up (a minus); more owed to suppliers means cash kept for now (a plus).
- Take off interest and tax actually paid in the year (not the amount charged in the accounts).
- Investing: cash spent on equipment and other fixed assets, less anything you sold.
- Financing: new loans and shares in, loan repayments and dividends out.
- Net change plus opening cash should equal the cash on the year-end balance sheet. The template checks this for you.
What the example shows
The fictional wholesaler made an operating profit of 196,000 but generated 189,000 of cash from operations, because growth tied up 101,000 in extra stock and debtors (partly offset by paying suppliers a little later). After tax, interest, 33,000 of new equipment, a 40,000 loan repayment and 24,000 of dividends, cash rose by 41,000 to 204,000. Profitable and growing, but every extra pound of sales needs cash behind it.
Profit isn't cash
This is the statement that shows why. A business can report a profit and still run short, because profit counts sales when they're made and cash counts them when they're paid. The working capital lines are where that difference shows up, which is why lenders and buyers read this statement closely.
Common mistakes
- Getting the working capital signs backwards. An increase in debtors reduces cash.
- Using the tax charge instead of tax paid.
- Counting a loan repayment as an expense. It's financing, and only the interest goes through the P&L.
- Not reconciling to the balance sheet cash. If the closing figure doesn't match, something is missing.
Frequently asked questions
What's the difference between the direct and indirect method?
The direct method lists actual receipts and payments. The indirect method starts from profit and adjusts it. Both reach the same cash figure; the indirect method is easier to prepare from normal accounts.
Do small companies need a cash flow statement?
It depends on the company's size and the accounting rules it follows, so ask your accountant. Banks, investors and buyers often ask for one either way.
How is this different from a cash flow forecast?
A statement explains the past year. A forecast predicts the coming weeks or months so you can see a shortfall coming.
What is free cash flow?
Definitions vary, but a common one is net cash from operating activities minus what you spent on fixed assets: the cash left over to repay debt, pay dividends or build reserves. In the example it's 105,000 (138,000 from operations less 33,000 of equipment).
Where do the working capital figures come from?
From comparing this year's balance sheet with last year's: the change in stock, the change in what customers owe and the change in what you owe suppliers and the tax authorities. That's why the template is easiest to fill in alongside the balance sheet.