That's a question many small business owners ask themselves way too often. In other articles, I have written about balance sheets and income statements as financial tools to help entrepreneurs manage their businesses. But what if that entrepreneur could predict how much cash would be coming into and going out of the business on a monthly basis? Or better yet, be able to look months down the road and have an idea of the intake and outflow of cash?

The cash flow statement rounds out the "big three" financial reports. This report shows the cash received and paid during a specified time period as related to the business’s revenue and expense categories found on the income statement —  information that is very helpful for startups.

A simple analogy for this report would be to look at a business checkbook, where each deposit and withdrawal is recorded. The cash flow report does the same thing, except it groups the intakes and outflows in categories. By doing this, it allows the owner to see monthly trends by categories and start adjusting for seasonal variances.

This report also helps the owner stay on top of the business cash cycle — the time lapse from when money was spent to generate sales until the revenue from sales comes into the business. This cycle could be days, weeks or months, but it shows the owner if additional cash is needed to cover expenses until sales revenue comes in from the sales-related expenditure.

The cash cycle sounds easy, but the devil is in the details. The owner will need to be diligent in tracking the cash flow in and out of the business on a regular basis.

Your area Missouri SBDC can help answer questions, offers training and one-on-one appointments; reach out to a location near you.

The Missouri SBDC is funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.