A cash flow statement template is a spreadsheet that shows where your cash came from and where it went over a period, split into operating, investing and financing activities. Download the free Excel template below. It uses the indirect method, starting from net income, and calculates net cash from each activity, the net change in cash and your ending cash balance, then checks it against your balance sheet.
- Operating activities: net income, depreciation and working capital changes
- Investing activities: equipment purchases and asset sales
- Financing activities: line of credit draws and repayments, loans, owner contributions and distributions
- Net change in cash, beginning cash and ending cash
- A reconciliation check against cash on your balance sheet
- Current and prior period columns, plus a filled-in example
What Is a Cash Flow Statement?
A cash flow statement, or statement of cash flows, explains how a business's cash balance changed over a period. It links the other two financial statements: it starts with net income from the profit and loss statement and ends with the cash balance shown on the balance sheet.
Profit and cash are not the same thing. A business can be profitable and still run short of cash, which is why lenders look closely at this statement.
The Three Sections of a Cash Flow Statement
- Operating activities: cash generated by day-to-day business. Under the indirect method, you start with net income, add back non-cash expenses such as depreciation, and adjust for changes in receivables, inventory, payables and accrued expenses.
- Investing activities: cash spent on or received from long-term assets, such as equipment purchases or the sale of a vehicle.
- Financing activities: cash from or to lenders and owners, including line of credit draws and repayments, loan proceeds and principal payments, owner contributions and distributions.
Net change in cash = operating + investing + financing. Add beginning cash to get ending cash.
How to Fill Out the Cash Flow Statement Template
- Enter net income from your profit and loss statement for the period.
- Add back depreciation and amortization, which reduce profit but don't use cash.
- Enter working capital changes using the sign convention in each label: an increase in receivables, inventory or prepaid expenses is negative, and an increase in payables or accrued expenses is positive.
- Enter investing activities. Equipment purchases are negative; proceeds from asset sales are positive.
- Enter financing activities. Loan repayments and owner distributions are negative; new borrowing and owner contributions are positive.
- Enter beginning cash and, optionally, the cash figure from your balance sheet. The reconciliation row confirms they match.
Cash Flow Statement Example
From the template's Example sheet (fiscal 2025):
| Line item | Amount |
|---|---|
| Net income | $95,000 |
| Depreciation and amortization | $15,000 |
| Increase in accounts receivable | ($20,000) |
| Increase in inventory | ($15,000) |
| Increase in prepaid expenses | ($2,000) |
| Increase in accounts payable | $10,000 |
| Increase in accrued expenses | $3,000 |
| Net cash from operating activities | $86,000 |
| Net cash from investing activities | ($10,000) |
| Net cash from financing activities | ($51,000) |
| Net change in cash | $25,000 |
| Cash at beginning of period | $60,000 |
| Cash at end of period | $85,000 |
The business earned $95,000 but generated $86,000 of operating cash, because $35,000 went into growing receivables and inventory. Ending cash of $85,000 matches the cash on its balance sheet.
How to Read Your Cash Flow Statement
- Positive operating cash flow means the core business generates cash. Negative operating cash flow for several periods is a warning sign, even if the P&L shows a profit.
- Free cash flow = operating cash flow − capital expenditures. In the example: $86,000 − $10,000 = $76,000.
- Working capital drag: large negative adjustments for receivables and inventory show how much growth is consuming cash. See cash flow vs revenue.
- Reliance on financing: if cash only increases because of new borrowing, operations aren't funding the business yet.
Common Mistakes
- Getting the signs wrong on working capital changes. Increases in assets use cash; increases in liabilities provide cash.
- Counting loan principal as an expense. Principal repayments are financing outflows; only interest affects net income.
- Forgetting non-cash items such as depreciation, amortization or gains on asset sales.
- Not reconciling ending cash with the balance sheet.
Turning Cash Flow Insight Into Action
If your statement shows cash tied up in receivables and inventory, you have three levers: collect faster, pay suppliers on longer terms, or fund the gap. Use the accounts receivable aging report to chase overdue invoices, and a 13-week cash flow forecast to see the gap coming. For more ideas, see our guide to cash flow management.
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Frequently Asked Questions
What is a cash flow statement template?
It is a spreadsheet that organizes cash coming in and going out into operating, investing and financing activities and calculates the net change in cash and the ending cash balance.
What is the difference between the direct and indirect method?
The direct method lists actual cash receipts and payments. The indirect method starts with net income and adjusts for non-cash items and changes in working capital. Most small businesses and their accountants use the indirect method, which this template follows.
Why does an increase in accounts receivable reduce cash?
Sales on credit are counted in net income before the customer pays. If receivables grew during the period, some of the income hasn't arrived as cash yet, so the increase is subtracted.
What is free cash flow?
Free cash flow is cash from operating activities minus capital expenditures. It shows how much cash the business generates after maintaining and growing its equipment and property.
How is a cash flow statement different from a cash flow forecast?
A cash flow statement reports what already happened over a past period. A cash flow forecast, such as a 13-week forecast, projects future receipts and payments so you can plan ahead.
