What Your Cash Flow Can (and Can’t) Tell You

You’ve got a Profit and Loss Report that shows a profit and a Balance Sheet with decent assets, so why does it feel like there’s never enough money in the bank?

Enter the Cash Flow Statement, your business’s financial reality check.

What Your Cash Flow Statement Can Tell You

• Where Your Cash is Coming From

It breaks down cash from:

• Operating activities (your day-to-day business)

• Investing activities (asset purchases or sales)

• Financing activities (loans, owner contributions, or draws)

This tells you whether your business is self-sustaining or relying on outside money.

• Whether You Can Pay the Bills

  Even if you're profitable on paper, poor cash flow can leave you unable to cover expenses. This report helps identify timing issues, like late-paying customers or large bills due before income comes in.

  
  

• Patterns in Inflows and Outflows

  Over time, cash flow statements reveal trends. Are you consistently in the red at month-end? Is there a seasonal dip? This insight helps with budgeting and planning.

What Your Cash Flow Statement Can’t Tell You

• Business Profitability

  The Cash Flow Statement isn’t about profit, it’s about liquidity. You can have great cash flow from loans and still be losing money on operations.

  
  

• What You Owe

  It doesn’t break down specific debts or liabilities. For that, you need your Balance Sheet.

  
  

• Expense Details

  This report summarizes cash activity. It won’t tell you how much you spent on advertising or subscriptions, that’s covered in the Profit & Lost Report .

  
  

The Bottom Line

A profitable business can still fail if it runs out of cash. Your Cash Flow Statement fills in the gaps that the Profit & Loss Report and Balance Sheet don’t show. Together, they give you the full financial picture.

• Statement of Cash Flows: A report that tracks the actual movement of cash in and out of your business.

• Balance Sheet: A snapshot of what your business owns (assets) and what it owes (liabilities) at a specific point in time, including what belongs to you as the owner (equity).

• Profit & Loss Report: The story of your business’s profitability over a period.

  
  

And remember, financial reports are only as useful as the data behind them. If your books aren’t clean, your reports won’t be dependable.

Need help understanding of your numbers?

At Balanced Integrity Bookkeeping, I help business owners and entrepreneurs organize their books, understand their reports, and feel confident in their financial decisions.

Let’s chat! Book a free discovery call on our Book An Appointment page or contact us here.