Business Cash Flow Analysis

Business Cashflow Analysis

Business cash flow analysis examines the movement of money into and out of a company to understand its financial health. A business refers to an organization or entity engaged in commercial, professional, or industrial activities. Cash flow is the movement of cash and cash equivalents, reflecting how money is earned, spent, and managed. By analyzing cash flow, businesses gain valuable insights into their ability to meet short-term obligations, invest in growth, and maintain overall financial stability.

What Does Business Cash Flow Analysis Include?

Business cash flow analysis with bank statement incorporates key elements that offer a detailed breakdown of monetary transactions to track and manage funds effectively:

• Inflows: These represent the money coming into the account, such as customer payments, loan proceeds, or interest earnings.
• Outflows: These are funds spent or moved out, including expenses like payroll, rent, utilities, or investments.

Categories and Subcategories in Business Cashflow Analysis

To better organize the financial data, business cash flow analysis often classifies transactions into broader and more specific categories:

Here’s the revised table with no repetition in the "Category" and "Sub-Category 1" columns, and inflow is listed before outflow for each category:

1. Operating Activities
   These activities involve the day-to-day operations of the business and represent cash flows related to providing goods or services. These operation activities are further divided into a subcategory bucket based on the amount of incoming or outgoing in the business.
   1. Inflow
      1. Service Revenue: Cash received from professional or business-related services rendered.
      2. Sales Revenue: Cash earned from the sale of products or merchandise.
      3. Other Operating Income: Any other income directly related to core business activities, such as refunds or small unclassified gains.
      4. Internal Transfer: Credit entry from other internal business units.
   2. Outflow:
      1. Employee Wages: Cash spent on salaries, wages, and related benefits for employees.
      2. Rent Payment: Outflow for office or retail space rent.
      3. Utilities: Expenses for essential services such as electricity, water, and gas.
      4. Office Supplies: Expenses related to stationery and office consumables.
      5. Other Operating Expenses: Miscellaneous operations-related expenses, such as software licenses or repairs.
      6. Internal Transfer: Debit entry representing funds allocated to other internal business units.
2. Investing Activities:
   These represent transactions related to purchasing and selling long-term assets or other investments. Similarly, these investment activities are also divided into subcategories as inflowing or outflowing.
   1. Inflow
      1. Sale of Equipment: Cash received from selling business equipment or machinery.
      2. Sale of Investments: Proceeds from selling shares, bonds, or other financial instruments.
      3. Return on Investment: Earnings received as dividends or interest from prior investments
   2. Outflow
      1. Purchase of Equipment: Cash spent on acquiring new machinery, tools, or technology.
      2. Purchase of Property: Investments made in acquiring new office buildings, warehouses, or other real estate.
      3. Investment in Other Businesses: Expenditure for purchasing shares or stakes in other entities.
3. Financing Activities
   These include cash flows related to funding the business from external sources or owners. These are divided into subcategories based on the flow of cash in or out.
   1. Inflow:
      1. Loans Received: Inflows from loans or credit provided by financial institutions.
      2. Owner Investment: Capital injections or funds contributed by the business owner or partners.
      3. Line of Credit Draws: Cash inflows from using a revolving line of credit.
      4. Internal Transfer: Funds received from internal sources for financial balancing.
   2. Outlflow:
      1. Loan Payments: Cash outflows toward repayment of principal and interest on loans.
      2. Dividend Payments: Funds distributed as profits to shareholders or investors.
      3. Owner Withdrawals: Cash removed from the business by owners for personal use.
      4. Internal Transfer: Funds transferred out of the company to other internal divisions or reserves.

Why Use Cash Flow Analysis for Bank Statements?

• Improved Financial Insights: Categorizing and analyzing cash flows highlights spending patterns and revenue trends.
• Enhanced Budgeting: Understanding cash movements ensures better control over financial resources.
• Decision Support: Insights from cash flow analysis guide better business strategies, investments, and cost-cutting measures.

Sample for Business Cashflow Analysis:

Here are the sample files/output of the cashflow analysis done on business bank statements/accounts:

• JSON
• CSV