Managing your business finances isn’t just about tracking income and expenses—it’s about understanding how money flows in and out of your business. This is where a cash flow statement becomes an invaluable tool. Whether you’re running a small retail store in Cape Town, a tech startup in Johannesburg, or a consulting firm in Durban, having a clear view of your cash flow helps you make informed decisions, secure funding, and avoid financial surprises.
One tool that makes tracking and managing your finances easier is ProInvoice. Beyond helping you create professional invoices in minutes, ProInvoice provides solutions for monitoring cash flow, keeping expense records, and improving your overall financial management. If you’re serious about staying in control of your business finances, you can sign up for free here to get started.
In this article, we’ll break down:
- What a cash flow statement is
- Why it’s essential for your business
- The key components of a cash flow statement
- How to create one (with a free downloadable template)
- Tips for improving cash flow management
1. What is a Cash Flow Statement?
A cash flow statement is a financial report that shows how cash enters and leaves your business during a specific period. It’s one of the three core financial statements, alongside the income statement and balance sheet.
While an income statement shows profitability, and a balance sheet shows what you own and owe, a cash flow statement focuses on liquidity—how much actual cash is available for day-to-day operations.
This is crucial because, in business, you can be profitable on paper but still run into trouble if cash isn’t flowing in when you need it. For example, if clients delay payments but your bills are due, you could face a cash crunch despite having “profits.”
2. Why is a Cash Flow Statement Important for South African Businesses?
In South Africa’s competitive market, cash flow problems are among the top reasons small businesses close within the first two years. A well-prepared cash flow statement helps you:
- Identify cash shortages early – so you can take corrective action before it’s too late.
- Plan for growth – ensuring you have the liquidity to fund expansion projects.
- Secure loans or investments – lenders and investors want proof that you can manage cash efficiently.
- Avoid unnecessary debt – by aligning payments with expected income.
A cash flow statement also gives insight into how your business generates and spends cash, which helps in identifying wasteful spending and opportunities to improve profitability.
3. Key Components of a Cash Flow Statement
A standard cash flow statement is divided into three main sections:
a) Operating Activities
These are the day-to-day transactions that generate revenue and keep your business running. Examples include:
- Cash received from customers
- Payments to suppliers
- Salaries and wages
- Utility bills
For example, if you own a bakery in Pretoria, your sales income and payments for flour, sugar, and electricity would fall under operating activities.
b) Investing Activities
These involve cash flows from buying or selling long-term assets or investments. Examples:
- Purchasing new equipment
- Selling old machinery
- Buying stocks or bonds
If your Cape Town-based design firm buys new high-end computers for the team, that’s an investing activity.
c) Financing Activities
These relate to funding your business, either through debt or equity. Examples:
- Loans received or repaid
- Owner contributions
- Dividend payments
For instance, if you secure a loan from a South African bank to expand your store, it appears under financing activities.
4. How to Create a Cash Flow Statement (Step-by-Step)
Creating a cash flow statement doesn’t have to be intimidating. Follow these steps:
Step 1: Choose Your Reporting Period
Decide whether you want a monthly, quarterly, or yearly statement. Monthly tracking is best for small businesses, as it gives a more frequent view of your financial health.
Step 2: Gather Your Financial Data
Collect data from:
- Invoices issued and received
- Bank statements
- Payment receipts
- Loan agreements
Tools like ProInvoice simplify this by keeping all your invoicing and payment history in one place.
Step 3: Categorise Transactions
Sort transactions into the three main categories: operating, investing, and financing activities.
Step 4: Calculate Net Cash Flow
For each category:
- Add up cash inflows
- Subtract cash outflows
- Sum the three sections to get total net cash flow
Step 5: Analyse and Adjust
Look at trends. Are operating cash flows positive? Are investments draining cash without returns? Use this insight to make smarter decisions.
5. Sample Cash Flow Statement (Template)
Here’s an example of a simple monthly cash flow statement for a small business:
| Category | Cash Inflows (ZAR) | Cash Outflows (ZAR) | Net Cash Flow (ZAR) |
|---|---|---|---|
| Operating Activities | 120,000 | 80,000 | 40,000 |
| Investing Activities | 0 | 15,000 | -15,000 |
| Financing Activities | 50,000 | 10,000 | 40,000 |
| Total Net Cash Flow | 65,000 |
You can create something similar using our [Free Cash Flow Statement Template] (custom downloadable format via ProInvoice).
6. Tips for Better Cash Flow Management
Even with a statement in hand, your goal is to improve cash flow, not just track it. Here’s how:
- Send invoices promptly – Delayed invoicing equals delayed payments.
- Follow up on overdue payments – Don’t let unpaid invoices pile up.
- Cut unnecessary expenses – Review monthly spending and remove waste.
- Negotiate better payment terms – Both with suppliers and clients.
- Use digital tools – ProInvoice automates invoicing and helps you monitor outstanding payments in real-time.
7. Using ProInvoice for Cash Flow Tracking
ProInvoice isn’t just a free invoice generator—it’s a complete business financial tool. Here’s how it can help South African businesses:
- Track income and expenses automatically
- Generate professional invoices in minutes
- Monitor overdue payments
- Export data for cash flow statements
- Customise templates to match your brand
Sign up today on ProInvoice and start managing your finances like a pro.
Conclusion
A cash flow statement is one of the most powerful financial tools a business can use. It doesn’t just tell you where your money is going—it gives you the insight to make better, faster, and more strategic decisions.
By using tools like ProInvoice and maintaining an accurate cash flow statement, you can stay ahead of financial challenges and focus on growing your business sustainably.
