How to Calculate Cash Flow & Prepare a Cash Flow Statement | IE Consultant

A cash flow statement is about documenting where the money is going in your business and whether you’re suffering a loss or making a profit. Business Trends contacted a variety of experts to get the lowdown on how to calculate cash flow and prepare a cash flow statement which combines the numbers from any financing, operations and investing your business does.
Cash flow is the lifeblood of a business — In fact, a study found over 80% of business failure can be attributed to poor cash flow issues.

How to Calculate Cash Flow

Here is how you can start to put those numbers together into a statement using these three simple steps to understand formulas.

Operating Cash Flow:

This is one of the fundamental formulas that you’ll need in order to get everything else right. It’s an important number that small businesses can use to determine whether they have enough finances to expand or if they need outside help. Simply put, this is the amount of money your business makes from routine operations.

It’s no surprise there is a regulatory framework for this calculation from the Generally Accepted Accounting Principles (GAAP). Ask if they use this if you’re using an accountant.



Like the name suggests, the operating cash flow takes a look at the numbers from everyday activities. You’ll need to put together the cash flows from financing, operating and investing.

The easiest way to calculate and prepare a cash flow statement is by using cloud-based accounting software. Not only does this save you time, but it also reduces chances of errors.

Cash Flow of Investment Activities:

Next, you’ll need to consider this. The actual practice of getting this number is simpler than the name might suggest. IE Consultant suggests that you can get this data by simply subtracting cash outflows from cash inflows.

These focus on different kinds of investments and changes in assets that are long-term like when your small business buys or sells equipment or property.

Cash Flow of Financial Activities:

This calculation is done the same way as the one above by subtracting cash flows from cash inflows. In this part of the formula these numbers need to relate directly to things like loan payments loans and other financial tools.

Remember when you add the three formulas together, you’ll come up with a number called the net cash flow. If it’s positive, your business is doing well. On the other hand, if that number is negative, you’ll need to adjust accordingly.

International Executive Consulting LLC provides the best Rapid Cost Reduction Consulting Services, Irvine, USA. For more information, give us call now - +1 202-258-5376!

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