The cash flow statement is a financial report showing how cash moved in and out of your business during a period. It is divided into operating, investing and financing activities.
The cash flow statement (also called the statement of cash flows) is one of the three core financial statements alongside the profit and loss and balance sheet. It reconciles the difference between your net profit and your actual cash position by categorising all cash movements into three activities. Operating activities include cash from customers, payments to suppliers and employees, and tax payments - this section shows whether your core business generates cash. Investing activities cover buying and selling assets like equipment and property. Financing activities include loan drawdowns and repayments, equity injections and dividend payments. The cash flow statement explains why your bank balance changed during the period and is particularly important for businesses where profit and cash flow diverge significantly (common in growing businesses that extend credit to customers). SortBooks ensures accurate cash flow statement preparation by correctly categorising every transaction in Xero across operating, investing and financing activities.
SortBooks helps with the bookkeeping behind cash flow statement by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing cash flow statement by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
Cash flow is the movement of money in and out of your business. Positive cash flow means more money coming in than going out. It is often considered more important than profit for business survival.
The P&L (also called the income statement) shows your business revenue, expenses and resulting profit or loss over a specific period.
The balance sheet is a financial statement that shows your business's assets, liabilities and equity at a specific point in time. It follows the equation: Assets = Liabilities + Equity.
Operating cash flow is the cash generated from your core business activities, excluding investing and financing activities. It indicates whether your business is self-sustaining.
Working capital is the difference between current assets and current liabilities. It measures the short-term financial health and operational efficiency of your business.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.