Xero: Software that Every Small Business Should Have

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Xero: Software that Every Small Business Should Have
For every small business, cash is the king. Cash flow has made certain that any business can
pay its bills and staff, keeping the business operational. That’s why the Statement of Cash
Flows report is so important. It classifies the cash flowing in and out of a business, and can
help you make informed decisions about how your company works.
While the P & L statement includes income that might not yet have been paid by your
customers, the cash flow statement looks at all cash receipts and cash expenditure. It also
groups the money going in and going out of your business into useful categories.
The Statement of Cash Flows can help you understand:
Are you generating a cash surplus? Regardless of having to buy new equipment or
raising money via loans, this shows you if you’re profitable. And if not, why not?
Did your cash flow drop because you invested in things that you expect to make you
money in the future? This could be buying new equipment, or classic investing in
shares etc.
Did you end up with more money in this period because you took out loans? If so,
then that tells you in the future that you will lose cash to repay the debt.
Your business generates cash in many different ways. The Statement of Cash Flows breaks
it down into three main sections:
Cash Flows from Operating Activities shows what cash has come in and gone out
as a result of the main business activities, (such as receipts from customers,
payments to suppliers, wages paid to employees and so on.)
Cash Flows from Investing Activities includes things such as payments for new
assets like office equipment or a new company vehicle. It also includes receipts from
the sale of assets, and any investments made.
Cash Flows from Financing Activities shows any loan repayments, proceeds from
new loans, or money invested into the business or taken out by the owners.
Like the new Profit and Loss report, you can modify the layout of your cash flow
statement. It’s easy to lay out the order of groups and accounts on your report just the
way you want. This is done using an intuitive drag and drop interface. You can also split
an account into its debits and credits in the Statement of Cash Flows using the layout
editor. As with all new reports, the dates are entered using a convenient date picker to
quickly select common dates.
Xero provides reports the layout just the way you want. It provides a more granular
breakdown of where you’ve earned and spent cash. This is useful as not every business’s
chart of accounts is the same. An advisor can also help you understand the report. You can
make informed decisions about how your business operates to maintain good cash flow
and identify investment opportunities.