{"id":307287,"date":"2026-08-04T11:30:21","date_gmt":"2026-08-03T23:30:21","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?p=307287"},"modified":"2026-08-04T11:30:49","modified_gmt":"2026-08-03T23:30:49","slug":"how-to-read-a-cash-flow-statement","status":"publish","type":"post","link":"https:\/\/www.reckon.com\/au\/blog\/how-to-read-a-cash-flow-statement\/","title":{"rendered":"How to read a cash flow statement (and know what to do with it)"},"content":{"rendered":"

[et_pb_section fb_built=”1″ _builder_version=”4.16″ da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” locked=”off” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Intro” _builder_version=”4.27.7″ header_2_font_size=”32px” custom_margin=”||0px|||” custom_padding=”||28px|||” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

Your cash flow statement is arguably your most important financial report, as it lays out the cash coming in and out of your business. It shows whether your current operations can sustain your business. Where cash flow management gets difficult is in interpreting your numbers and determining whether positive (or negative) cash flow is a one-off occurrence or a more serious problem waiting to happen.<\/p>\n

Let\u2019s look at how to read your cash flow statement to better run your business.<\/p>\n

Cash flow statement layers: Operating > Investing > Financing<\/h2>\n

Cash flow statements are broken down into three main types of cash flow: operating, investing, and financing<\/a>. Each serves its own purpose, but still influences the others.<\/p>\n

Operating cash flow: Testing the quality of your \u2018earnings\u2019<\/h3>\n

Your operating cash flow is the money generated from trading activities minus your business expenses. Think of this level as your profit vs. cash<\/a>: for your business to sustain itself, your operating cash flow should track higher than your net income. If it\u2019s not, it means your business isn\u2019t covering its operating costs because cash is tied up elsewhere, maybe in excess inventory or accounts receivable.<\/p>\n

Here, you add back non-cash expense items, such as depreciation and amortisation. A quick way to assess your cash flow health is to use the quality-of-earnings ratio.<\/p>\n

Quality of earnings ratio = operating cash flow \/ net income<\/strong><\/em><\/p>\n

A good quality-of-earnings result is indicated by a number above 1.0, which means trading funds your operations adequately.<\/p>\n

Marty\u2019s operating cash flow<\/h4>\n

Let\u2019s look at an example of what operating cash flow looks like with Marty\u2019s cafe:<\/p>\n

[\/et_pb_text][et_pb_code _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ sticky_enabled=”0″]Operating Cash Flow \u2014 Proof v2<\/title><!-- [et_pb_line_break_holder] --><link rel=\"preconnect\" href=\"https:\/\/fonts.googleapis.com\"><!-- [et_pb_line_break_holder] --><link href=\"https:\/\/fonts.googleapis.com\/css2?family=Open+Sans:wght@400;600;700&display=swap\" rel=\"stylesheet\"><!-- [et_pb_line_break_holder] --><\/p>\n<style><!-- [et_pb_line_break_holder] --> :root {<!-- [et_pb_line_break_holder] --> --blackcurrant: #0a004a;<!-- [et_pb_line_break_holder] --> --grapefruit: #ff5447;<!-- [et_pb_line_break_holder] --> --blueberry: #5a3fff;<!-- [et_pb_line_break_holder] --> --white: #ffffff;<!-- [et_pb_line_break_holder] --> --pink: #ffe6e4;<!-- [et_pb_line_break_holder] --> --purple: #ded9ff;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> * { box-sizing: border-box; }<!-- [et_pb_line_break_holder] --> body {<!-- [et_pb_line_break_holder] --> font-family: 'Open Sans', sans-serif;<!-- [et_pb_line_break_holder] --> background: #f6f5fb;<!-- [et_pb_line_break_holder] --> margin: 0;<!-- [et_pb_line_break_holder] --> padding: 40px 20px;<!-- [et_pb_line_break_holder] --> color: var(--blackcurrant);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-ocf-wrap { max-width: 900px; 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line-height: 1.6; }<!-- [et_pb_line_break_holder] --> .rkn-ocf-prompt { font-size: 15px; color: #b8b3d6; line-height: 1.6; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> @media (max-width: 640px) {<!-- [et_pb_line_break_holder] --> .rkn-ocf-grid { grid-template-columns: 1fr; }<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><\/style>\n<p><!-- [et_pb_line_break_holder] --><\/head><!-- [et_pb_line_break_holder] --><body><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/p>\n<div class=\"rkn-ocf-wrap\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-grid\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-statement\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-statement-name\">Marty’s Cafe<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-statement-header\">Cash flow statement: operating activities<\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-section-box\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-row\" data-key=\"profit\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-name\">Net profit<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-amount\">$8,000<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-subheading\">Adjustments to reconcile net profit to cash<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-row\" data-key=\"depreciation\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-name\">Depreciation<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-amount\">+$1,200<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-subheading\">Changes in operating assets and liabilities<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-row\" data-key=\"payables\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-name\">Accounts payable<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-amount\">+$300<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-row rkn-total\" data-key=\"total\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-name\">Operating cash flow<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-ocf-line-amount\">$9,500<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-reveal\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-reveal-label\" id=\"rkn-ocf-label\" style=\"display:none;\">What this line means<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-swipe\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-swipe-inner\" id=\"rkn-ocf-swipe-inner\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-reveal-body\" id=\"rkn-ocf-body\"><\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-ocf-prompt\" id=\"rkn-ocf-prompt\">Click a line for an explanation.<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><script><!-- [et_pb_line_break_holder] -->(function() {<!-- [et_pb_line_break_holder] --> var data = {<!-- [et_pb_line_break_holder] --> profit: \"This is the net profit reported on the P&L. It's calculated on an accrual basis, recording income when it's earned and expenses when they're incurred.\",<!-- [et_pb_line_break_holder] --> depreciation: \"Depreciation reduced profit on paper this month. No cash actually left the business for it, so it's added back to move the figure from profit toward cash.\",<!-- [et_pb_line_break_holder] --> payables: \"Marty paid suppliers slightly later this month. This line reflects that timing shift in cash, separate from anything on the P&L.\",<!-- [et_pb_line_break_holder] --> total: \"Operating cash flow is $9,500, above the $8,000 net profit figure. This is the quality-of-earnings signal: trading is generating enough cash to fund itself this month.\"<!-- [et_pb_line_break_holder] --> };<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> var rows = document.querySelectorAll('.rkn-ocf-row');<!-- [et_pb_line_break_holder] --> var label = document.getElementById('rkn-ocf-label');<!-- [et_pb_line_break_holder] --> var body = document.getElementById('rkn-ocf-body');<!-- [et_pb_line_break_holder] --> var prompt = document.getElementById('rkn-ocf-prompt');<!-- [et_pb_line_break_holder] --> var swipeInner = document.getElementById('rkn-ocf-swipe-inner');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> rows.forEach(function(row) {<!-- [et_pb_line_break_holder] --> row.addEventListener('click', function(e) {<!-- [et_pb_line_break_holder] --> e.stopPropagation();<!-- [et_pb_line_break_holder] --> var key = row.getAttribute('data-key');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> rows.forEach(function(r) { r.classList.remove('rkn-active'); });<!-- [et_pb_line_break_holder] --> row.classList.add('rkn-active');<!-- [et_pb_line_break_holder] --> row.classList.add('rkn-visited');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> prompt.style.display = 'none';<!-- [et_pb_line_break_holder] --> label.style.display = 'block';<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> swipeInner.classList.remove('rkn-in');<!-- [et_pb_line_break_holder] --> void swipeInner.offsetWidth; \/\/ reflow to restart animation<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> body.innerHTML = data[key];<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> requestAnimationFrame(function() {<!-- [et_pb_line_break_holder] --> swipeInner.classList.add('rkn-in');<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] -->})();<!-- [et_pb_line_break_holder] --><\/script><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/body><!-- [et_pb_line_break_holder] --><\/html>[\/et_pb_code][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n<h3>Investing cash flow: Growth and maintenance<\/h3>\n<p>Investing cash flow comes from assets, whether spending on earning. At this layer, just having cash outflows doesn\u2019t spell disaster, since this money maintains or grows the business (or both). You have to spend money to make money; the real question is whether your capital expenditure (CapEx) can be funded by your operating cash flow while still having cash to spare.<\/p>\n<p>This is expressed as free cash flow, the cash left over after expenses and CapEx.<\/p>\n<p style=\"text-align: center;\"><em><strong>Free cash flow (FCF) = Operating cash flow – capital expenditures<\/strong><\/em><\/p>\n<p>Free cash flow (FCF) gives you flexibility and breathing room for debt refinancing and reinvestment.<\/p>\n<h4>Marty\u2019s investing cash flow<\/h4>\n<p>Marty has found his operating cash flow, but how does it compare to investing in his business’s productivity?<\/p>\n<p>[\/et_pb_text][et_pb_code _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ sticky_enabled=”0″]<!DOCTYPE html><!-- [et_pb_line_break_holder] --><html lang=\"en\"><!-- [et_pb_line_break_holder] --><head><!-- [et_pb_line_break_holder] --><meta charset=\"UTF-8\"><!-- [et_pb_line_break_holder] --><title>Investing Cash Flow \u2014 Proof<\/title><!-- [et_pb_line_break_holder] --><link rel=\"preconnect\" href=\"https:\/\/fonts.googleapis.com\"><!-- [et_pb_line_break_holder] --><link href=\"https:\/\/fonts.googleapis.com\/css2?family=Open+Sans:wght@400;600;700&display=swap\" rel=\"stylesheet\"><!-- [et_pb_line_break_holder] --><\/p>\n<style><!-- [et_pb_line_break_holder] --> :root {<!-- [et_pb_line_break_holder] --> --blackcurrant: #0a004a;<!-- [et_pb_line_break_holder] --> --grapefruit: #ff5447;<!-- [et_pb_line_break_holder] --> --blueberry: #5a3fff;<!-- [et_pb_line_break_holder] --> --white: #ffffff;<!-- [et_pb_line_break_holder] --> --pink: #ffe6e4;<!-- [et_pb_line_break_holder] --> --purple: #ded9ff;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> * { box-sizing: border-box; }<!-- [et_pb_line_break_holder] --> body {<!-- [et_pb_line_break_holder] --> font-family: 'Open Sans', sans-serif;<!-- [et_pb_line_break_holder] --> background: #f6f5fb;<!-- [et_pb_line_break_holder] --> margin: 0;<!-- [et_pb_line_break_holder] --> padding: 40px 20px;<!-- [et_pb_line_break_holder] --> color: var(--blackcurrant);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-wrap { max-width: 900px; margin: 0 auto; }<!-- [et_pb_line_break_holder] --> .rkn-icf-eyebrow {<!-- [et_pb_line_break_holder] --> font-size: 13px; font-weight: 700; letter-spacing: 0.08em;<!-- [et_pb_line_break_holder] --> text-transform: uppercase; color: var(--grapefruit); margin-bottom: 8px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-title { font-size: 24px; font-weight: 700; margin: 0 0 6px; }<!-- [et_pb_line_break_holder] --> .rkn-icf-sub { font-size: 15px; color: #5a5a72; margin: 0 0 28px; max-width: 560px; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-icf-grid {<!-- [et_pb_line_break_holder] --> display: grid; grid-template-columns: 1.2fr 1fr; gap: 0;<!-- [et_pb_line_break_holder] --> border-radius: 16px; overflow: hidden;<!-- [et_pb_line_break_holder] --> box-shadow: 0 12px 40px rgba(10,0,74,0.10);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-icf-statement { background: var(--white); padding: 30px 30px 26px; }<!-- [et_pb_line_break_holder] --> .rkn-icf-statement-name { font-size: 17px; font-weight: 700; color: var(--blackcurrant); margin-bottom: 2px; }<!-- [et_pb_line_break_holder] --> .rkn-icf-statement-header {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.05em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: #6b6690; border-bottom: 2px solid var(--blackcurrant);<!-- [et_pb_line_break_holder] --> padding-bottom: 12px; margin-bottom: 4px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-section-box {<!-- [et_pb_line_break_holder] --> border: 1px dashed #c7c2e0; border-radius: 12px; padding: 18px 18px 22px; margin-top: 18px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-subheading {<!-- [et_pb_line_break_holder] --> font-size: 11px; font-weight: 700; letter-spacing: 0.04em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: #8a85a6; padding: 4px 10px 8px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-row {<!-- [et_pb_line_break_holder] --> display: flex; align-items: center; justify-content: space-between; gap: 12px;<!-- [et_pb_line_break_holder] --> padding: 12px 10px; margin-left: 8px; border-radius: 8px; cursor: pointer;<!-- [et_pb_line_break_holder] --> border: 1px solid transparent; transition: background 0.15s ease, border-color 0.15s ease;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-row:hover { background: var(--pink); }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-active { background: var(--pink); border-color: var(--grapefruit); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total {<!-- [et_pb_line_break_holder] --> margin-left: 0; margin-top: 18px; border-radius: 0;<!-- [et_pb_line_break_holder] --> border-top: 2px solid var(--blackcurrant); padding-top: 18px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total:hover,<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total.rkn-active { background: var(--purple); border-top-color: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-icf-line-left { display: flex; align-items: center; gap: 10px; }<!-- [et_pb_line_break_holder] --> .rkn-icf-dot { width: 8px; height: 8px; border-radius: 50%; background: #e2e0ee; flex-shrink: 0; transition: background 0.15s ease; }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-visited .rkn-icf-dot { background: var(--grapefruit); }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total .rkn-icf-dot { background: #d6d2ea; }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total.rkn-visited .rkn-icf-dot { background: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-icf-line-name { font-size: 14.5px; font-weight: 600; }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total .rkn-icf-line-name { font-size: 15.5px; font-weight: 700; text-transform: uppercase; letter-spacing: 0.03em; }<!-- [et_pb_line_break_holder] --> .rkn-icf-line-amount { font-size: 14.5px; font-weight: 700; font-variant-numeric: tabular-nums; white-space: nowrap; }<!-- [et_pb_line_break_holder] --> .rkn-icf-row.rkn-total .rkn-icf-line-amount { font-size: 16px; color: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-icf-reveal {<!-- [et_pb_line_break_holder] --> background: var(--blackcurrant); color: var(--white); padding: 30px 28px;<!-- [et_pb_line_break_holder] --> display: flex; flex-direction: column; justify-content: center; min-height: 300px;<!-- [et_pb_line_break_holder] --> position: relative; overflow: hidden;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-reveal-label {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.06em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: var(--grapefruit); margin-bottom: 14px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-swipe { overflow: hidden; }<!-- [et_pb_line_break_holder] --> .rkn-icf-swipe-inner {<!-- [et_pb_line_break_holder] --> transform: translateY(100%); opacity: 0;<!-- [et_pb_line_break_holder] --> transition: transform 0.35s cubic-bezier(0.22, 1, 0.36, 1), opacity 0.3s ease;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-icf-swipe-inner.rkn-in { transform: translateY(0); opacity: 1; }<!-- [et_pb_line_break_holder] --> .rkn-icf-reveal-body { font-size: 16px; line-height: 1.6; }<!-- [et_pb_line_break_holder] --> .rkn-icf-prompt { font-size: 15px; color: #b8b3d6; line-height: 1.6; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> @media (max-width: 640px) { .rkn-icf-grid { grid-template-columns: 1fr; } }<!-- [et_pb_line_break_holder] --><\/style>\n<p><!-- [et_pb_line_break_holder] --><\/head><!-- [et_pb_line_break_holder] --><body><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/p>\n<div class=\"rkn-icf-wrap\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-grid\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-statement\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-statement-name\">Marty’s Cafe<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-statement-header\">Cash flow statement: investing activities<\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-section-box\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-subheading\">Purchases of property and equipment<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-row\" data-key=\"machine\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-icf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-icf-line-name\">Espresso machine<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-icf-line-amount\">($6,000)<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-row rkn-total\" data-key=\"total\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-icf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-icf-line-name\">Investing cash flow<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-icf-line-amount\">($6,000)<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-reveal\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-reveal-label\" id=\"rkn-icf-label\" style=\"display:none;\">What this line means<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-swipe\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-swipe-inner\" id=\"rkn-icf-swipe-inner\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-reveal-body\" id=\"rkn-icf-body\"><\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-icf-prompt\" id=\"rkn-icf-prompt\">Click a line for an explanation.<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><script><!-- [et_pb_line_break_holder] -->(function() {<!-- [et_pb_line_break_holder] --> var data = {<!-- [et_pb_line_break_holder] --> machine: \"This is the cost of a new espresso machine. Spending on equipment like this is growth capex, money that expands what the cafe can do.\",<!-- [et_pb_line_break_holder] --> total: \"Investing cash flow is $6,000 negative this month. Operating cash flow covers this purchase comfortably, so the equipment is funded by the business itself.\"<!-- [et_pb_line_break_holder] --> };<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> var rows = document.querySelectorAll('.rkn-icf-row');<!-- [et_pb_line_break_holder] --> var label = document.getElementById('rkn-icf-label');<!-- [et_pb_line_break_holder] --> var body = document.getElementById('rkn-icf-body');<!-- [et_pb_line_break_holder] --> var prompt = document.getElementById('rkn-icf-prompt');<!-- [et_pb_line_break_holder] --> var swipeInner = document.getElementById('rkn-icf-swipe-inner');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> rows.forEach(function(row) {<!-- [et_pb_line_break_holder] --> row.addEventListener('click', function(e) {<!-- [et_pb_line_break_holder] --> e.stopPropagation();<!-- [et_pb_line_break_holder] --> var key = row.getAttribute('data-key');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> rows.forEach(function(r) { r.classList.remove('rkn-active'); });<!-- [et_pb_line_break_holder] --> row.classList.add('rkn-active');<!-- [et_pb_line_break_holder] --> row.classList.add('rkn-visited');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> prompt.style.display = 'none';<!-- [et_pb_line_break_holder] --> label.style.display = 'block';<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> swipeInner.classList.remove('rkn-in');<!-- [et_pb_line_break_holder] --> void swipeInner.offsetWidth;<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> body.innerHTML = data[key];<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> requestAnimationFrame(function() {<!-- [et_pb_line_break_holder] --> swipeInner.classList.add('rkn-in');<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] -->})();<!-- [et_pb_line_break_holder] --><\/script><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/body><!-- [et_pb_line_break_holder] --><\/html>[\/et_pb_code][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n<h3>Financing cash flow: Sustainably servicing your debts<\/h3>\n<p>When it comes to operating and investing activities, you’re trying to ensure your business sustains itself and can grow; at the financing layer, however, you\u2019re looking to fund your business from external sources. Is it enough to finance growth, or are you just plugging holes in your shortfall?<\/p>\n<h4>Marty\u2019s financing cash flow<\/h4>\n<p>Marty\u2019s financing activity is the final layer that completes his cafe\u2019s month-end cash flow statement:<\/p>\n<p>[\/et_pb_text][et_pb_code _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ sticky_enabled=”0″]<!DOCTYPE html><!-- [et_pb_line_break_holder] --><html lang=\"en\"><!-- [et_pb_line_break_holder] --><head><!-- [et_pb_line_break_holder] --><meta charset=\"UTF-8\"><!-- [et_pb_line_break_holder] --><title>Financing Cash Flow \u2014 Proof<\/title><!-- [et_pb_line_break_holder] --><link rel=\"preconnect\" href=\"https:\/\/fonts.googleapis.com\"><!-- [et_pb_line_break_holder] --><link href=\"https:\/\/fonts.googleapis.com\/css2?family=Open+Sans:wght@400;600;700&display=swap\" rel=\"stylesheet\"><!-- [et_pb_line_break_holder] --><\/p>\n<style><!-- [et_pb_line_break_holder] --> :root {<!-- [et_pb_line_break_holder] --> --blackcurrant: #0a004a;<!-- [et_pb_line_break_holder] --> --grapefruit: #ff5447;<!-- [et_pb_line_break_holder] --> --blueberry: #5a3fff;<!-- [et_pb_line_break_holder] --> --white: #ffffff;<!-- [et_pb_line_break_holder] --> --pink: #ffe6e4;<!-- [et_pb_line_break_holder] --> --purple: #ded9ff;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> * { box-sizing: border-box; }<!-- [et_pb_line_break_holder] --> body {<!-- [et_pb_line_break_holder] --> font-family: 'Open Sans', sans-serif;<!-- [et_pb_line_break_holder] --> background: #f6f5fb;<!-- [et_pb_line_break_holder] --> margin: 0;<!-- [et_pb_line_break_holder] --> padding: 40px 20px;<!-- [et_pb_line_break_holder] --> color: var(--blackcurrant);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-wrap { max-width: 900px; margin: 0 auto; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-eyebrow {<!-- [et_pb_line_break_holder] --> font-size: 13px; font-weight: 700; letter-spacing: 0.08em;<!-- [et_pb_line_break_holder] --> text-transform: uppercase; color: var(--grapefruit); margin-bottom: 8px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-title { font-size: 24px; font-weight: 700; margin: 0 0 6px; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-sub { font-size: 15px; color: #5a5a72; margin: 0 0 28px; max-width: 560px; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-fcf-grid {<!-- [et_pb_line_break_holder] --> display: grid; grid-template-columns: 1.2fr 1fr; gap: 0;<!-- [et_pb_line_break_holder] --> border-radius: 16px; overflow: hidden;<!-- [et_pb_line_break_holder] --> box-shadow: 0 12px 40px rgba(10,0,74,0.10);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-fcf-statement { background: var(--white); padding: 30px 30px 26px; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-statement-name { font-size: 17px; font-weight: 700; color: var(--blackcurrant); margin-bottom: 2px; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-statement-header {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.05em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: #6b6690; border-bottom: 2px solid var(--blackcurrant);<!-- [et_pb_line_break_holder] --> padding-bottom: 12px; margin-bottom: 4px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-section-box {<!-- [et_pb_line_break_holder] --> border: 1px dashed #c7c2e0; border-radius: 12px; padding: 18px 18px 22px; margin-top: 18px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row {<!-- [et_pb_line_break_holder] --> display: flex; align-items: center; justify-content: space-between; gap: 12px;<!-- [et_pb_line_break_holder] --> padding: 12px 10px; margin-left: 8px; border-radius: 8px; cursor: pointer;<!-- [et_pb_line_break_holder] --> border: 1px solid transparent; transition: background 0.15s ease, border-color 0.15s ease;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row:hover { background: var(--pink); }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-active { background: var(--pink); border-color: var(--grapefruit); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total {<!-- [et_pb_line_break_holder] --> margin-left: 0; margin-top: 18px; border-radius: 0;<!-- [et_pb_line_break_holder] --> border-top: 2px solid var(--blackcurrant); padding-top: 18px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total:hover,<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total.rkn-active { background: var(--purple); border-top-color: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-fcf-line-left { display: flex; align-items: center; gap: 10px; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-dot { width: 8px; height: 8px; border-radius: 50%; background: #e2e0ee; flex-shrink: 0; transition: background 0.15s ease; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-visited .rkn-fcf-dot { background: var(--grapefruit); }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total .rkn-fcf-dot { background: #d6d2ea; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total.rkn-visited .rkn-fcf-dot { background: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-fcf-line-name { font-size: 14.5px; font-weight: 600; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total .rkn-fcf-line-name { font-size: 15.5px; font-weight: 700; text-transform: uppercase; letter-spacing: 0.03em; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-line-amount { font-size: 14.5px; font-weight: 700; font-variant-numeric: tabular-nums; white-space: nowrap; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-row.rkn-total .rkn-fcf-line-amount { font-size: 16px; color: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-fcf-reveal {<!-- [et_pb_line_break_holder] --> background: var(--blackcurrant); color: var(--white); padding: 30px 28px;<!-- [et_pb_line_break_holder] --> display: flex; flex-direction: column; justify-content: center; min-height: 300px;<!-- [et_pb_line_break_holder] --> position: relative; overflow: hidden;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-reveal-label {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.06em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: var(--grapefruit); margin-bottom: 14px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-swipe { overflow: hidden; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-swipe-inner {<!-- [et_pb_line_break_holder] --> transform: translateY(100%); opacity: 0;<!-- [et_pb_line_break_holder] --> transition: transform 0.35s cubic-bezier(0.22, 1, 0.36, 1), opacity 0.3s ease;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-fcf-swipe-inner.rkn-in { transform: translateY(0); opacity: 1; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-reveal-body { font-size: 16px; line-height: 1.6; }<!-- [et_pb_line_break_holder] --> .rkn-fcf-prompt { font-size: 15px; color: #b8b3d6; line-height: 1.6; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> @media (max-width: 640px) { .rkn-fcf-grid { grid-template-columns: 1fr; } }<!-- [et_pb_line_break_holder] --><\/style>\n<p><!-- [et_pb_line_break_holder] --><\/head><!-- [et_pb_line_break_holder] --><body><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/p>\n<div class=\"rkn-fcf-wrap\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-grid\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-statement\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-statement-name\">Marty’s Cafe<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-statement-header\">Cash flow statement: financing activities<\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-section-box\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-row\" data-key=\"drawn\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-line-name\">Equipment loan drawn<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-line-amount\">$4,000<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-row\" data-key=\"repayment\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-line-name\">Loan repayment<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-line-amount\">($500)<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-row rkn-total\" data-key=\"total\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-line-left\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-dot\"><\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-line-name\">Financing cash flow<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <span class=\"rkn-fcf-line-amount\">$3,500<\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-reveal\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-reveal-label\" id=\"rkn-fcf-label\" style=\"display:none;\">What this line means<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-swipe\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-swipe-inner\" id=\"rkn-fcf-swipe-inner\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-reveal-body\" id=\"rkn-fcf-body\"><\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-fcf-prompt\" id=\"rkn-fcf-prompt\">Click a line for an explanation.<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><script><!-- [et_pb_line_break_holder] -->(function() {<!-- [et_pb_line_break_holder] --> var data = {<!-- [et_pb_line_break_holder] --> drawn: \"This is a loan taken out to help fund the espresso machine. It funds one specific, identifiable purchase.\",<!-- [et_pb_line_break_holder] --> repayment: \"This is the amount repaid on the loan this month. It's covered by cash generated through trading.\",<!-- [et_pb_line_break_holder] --> total: \"Financing cash flow is $3,500 positive this month. It reflects the new loan drawn down alongside the repayment already being made on it.\"<!-- [et_pb_line_break_holder] --> };<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> var rows = document.querySelectorAll('.rkn-fcf-row');<!-- [et_pb_line_break_holder] --> var label = document.getElementById('rkn-fcf-label');<!-- [et_pb_line_break_holder] --> var body = document.getElementById('rkn-fcf-body');<!-- [et_pb_line_break_holder] --> var prompt = document.getElementById('rkn-fcf-prompt');<!-- [et_pb_line_break_holder] --> var swipeInner = document.getElementById('rkn-fcf-swipe-inner');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> rows.forEach(function(row) {<!-- [et_pb_line_break_holder] --> row.addEventListener('click', function(e) {<!-- [et_pb_line_break_holder] --> e.stopPropagation();<!-- [et_pb_line_break_holder] --> var key = row.getAttribute('data-key');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> rows.forEach(function(r) { r.classList.remove('rkn-active'); });<!-- [et_pb_line_break_holder] --> row.classList.add('rkn-active');<!-- [et_pb_line_break_holder] --> row.classList.add('rkn-visited');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> prompt.style.display = 'none';<!-- [et_pb_line_break_holder] --> label.style.display = 'block';<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> swipeInner.classList.remove('rkn-in');<!-- [et_pb_line_break_holder] --> void swipeInner.offsetWidth;<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> body.innerHTML = data[key];<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> requestAnimationFrame(function() {<!-- [et_pb_line_break_holder] --> swipeInner.classList.add('rkn-in');<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] -->})();<!-- [et_pb_line_break_holder] --><\/script><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/body><!-- [et_pb_line_break_holder] --><\/html><!-- [et_pb_line_break_holder] -->[\/et_pb_code][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n<h2>Interpreting your cash flow<\/h2>\n<p>Your cash flow statement helps you assess the health of your cash flow and forecast future cash flows (positive or negative). Just as you would scrutinise and interpret your <a href=\"https:\/\/www.reckon.com\/au\/blog\/small-business-profit-and-loss-guide\/\">profit and loss reports monthly<\/a>, you also need to do so with your cash flow statements. By using both in tandem, you can better identify barriers to positive cash flow.<\/p>\n<p>With your cash flow statement, pay attention to these key metrics to see where you stand:<\/p>\n<ul>\n<li><strong>Quality of earnings ratio:<\/strong> Cash flow from operations divided by net income. Anything above 1.0 indicates that trading generates more cash than profit in your P&L. This gives you your baseline.<\/li>\n<li><strong>Free cash flow:<\/strong> Operating cash flow minus capital expenditures. Operating cash flow needs to absorb investing activities so your business can support its operations while also growing. If not, your business is drawing down cash reserves or requires more financing.<\/li>\n<li><strong>Monthly comparisons:<\/strong> Compare month-on-month to track your cash flow. These are helpful for preparing your <a href=\"https:\/\/www.reckon.com\/au\/small-business-resources\/cashflow-forecast-template\/\">cash flow forecasts<\/a> for going into slow and peak periods, while also identifying negative cash flow instances as one-offs or trends.<\/li>\n<\/ul>\n<h3>Operating with negative cash flow<\/h3>\n<p>If cash flow is negative in a month, don\u2019t panic. There will be times when you\u2019ll have more money moving out from the business than coming in. Instead, determine how long you can survive with your current cash reserve in the <strong>cash runway ratio<\/strong>. By dividing your cash reserves by your monthly burn rate (total cash leaving the business per month), you get a ratio of how many months you can operate at a loss.<\/p>\n<h3>Marty’s Cafe: two months, side by side<\/h3>\n<p>Toggle between a healthy month and a month where stock changes the picture.<\/p>\n<p>[\/et_pb_text][et_pb_code _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ sticky_enabled=”0″]<!DOCTYPE html><!-- [et_pb_line_break_holder] --><html lang=\"en\"><!-- [et_pb_line_break_holder] --><head><!-- [et_pb_line_break_holder] --><meta charset=\"UTF-8\"><!-- [et_pb_line_break_holder] --><title>Full Cash Flow Statement \u2014 Toggle Proof<\/title><!-- [et_pb_line_break_holder] --><link rel=\"preconnect\" href=\"https:\/\/fonts.googleapis.com\"><!-- [et_pb_line_break_holder] --><link href=\"https:\/\/fonts.googleapis.com\/css2?family=Open+Sans:wght@400;600;700&display=swap\" rel=\"stylesheet\"><!-- [et_pb_line_break_holder] --><\/p>\n<style><!-- [et_pb_line_break_holder] --> :root {<!-- [et_pb_line_break_holder] --> --blackcurrant: #0a004a;<!-- [et_pb_line_break_holder] --> --grapefruit: #ff5447;<!-- [et_pb_line_break_holder] --> --blueberry: #5a3fff;<!-- [et_pb_line_break_holder] --> --white: #ffffff;<!-- [et_pb_line_break_holder] --> --pink: #ffe6e4;<!-- [et_pb_line_break_holder] --> --purple: #ded9ff;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> * { box-sizing: border-box; }<!-- [et_pb_line_break_holder] --> body {<!-- [et_pb_line_break_holder] --> font-family: 'Open Sans', sans-serif;<!-- [et_pb_line_break_holder] --> background: #f6f5fb;<!-- [et_pb_line_break_holder] --> margin: 0;<!-- [et_pb_line_break_holder] --> padding: 40px 20px;<!-- [et_pb_line_break_holder] --> color: var(--blackcurrant);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-wrap { max-width: 640px; margin: 0 auto; }<!-- [et_pb_line_break_holder] --> .rkn-tog-eyebrow {<!-- [et_pb_line_break_holder] --> font-size: 13px; font-weight: 700; letter-spacing: 0.08em;<!-- [et_pb_line_break_holder] --> text-transform: uppercase; color: var(--grapefruit); margin-bottom: 8px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-title { font-size: 24px; font-weight: 700; margin: 0 0 6px; }<!-- [et_pb_line_break_holder] --> .rkn-tog-sub { font-size: 15px; color: #5a5a72; margin: 0 0 24px; max-width: 520px; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-switch {<!-- [et_pb_line_break_holder] --> display: inline-flex;<!-- [et_pb_line_break_holder] --> background: var(--white);<!-- [et_pb_line_break_holder] --> border-radius: 999px;<!-- [et_pb_line_break_holder] --> padding: 4px;<!-- [et_pb_line_break_holder] --> box-shadow: 0 4px 16px rgba(10,0,74,0.08);<!-- [et_pb_line_break_holder] --> margin-bottom: 22px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-btn {<!-- [et_pb_line_break_holder] --> border: none;<!-- [et_pb_line_break_holder] --> background: transparent;<!-- [et_pb_line_break_holder] --> font-family: 'Open Sans', sans-serif;<!-- [et_pb_line_break_holder] --> font-size: 14px;<!-- [et_pb_line_break_holder] --> font-weight: 700;<!-- [et_pb_line_break_holder] --> padding: 10px 20px;<!-- [et_pb_line_break_holder] --> border-radius: 999px;<!-- [et_pb_line_break_holder] --> cursor: pointer;<!-- [et_pb_line_break_holder] --> color: #8a85a6;<!-- [et_pb_line_break_holder] --> transition: background 0.2s ease, color 0.2s ease;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-btn.rkn-tog-active {<!-- [et_pb_line_break_holder] --> background: var(--blackcurrant);<!-- [et_pb_line_break_holder] --> color: var(--white);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-card {<!-- [et_pb_line_break_holder] --> background: var(--white);<!-- [et_pb_line_break_holder] --> border-radius: 16px;<!-- [et_pb_line_break_holder] --> box-shadow: 0 12px 40px rgba(10,0,74,0.10);<!-- [et_pb_line_break_holder] --> padding: 30px 30px 26px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-statement-name { font-size: 17px; font-weight: 700; margin-bottom: 2px; }<!-- [et_pb_line_break_holder] --> .rkn-tog-statement-header {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.05em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: #6b6690; border-bottom: 2px solid var(--blackcurrant);<!-- [et_pb_line_break_holder] --> padding-bottom: 12px; margin-bottom: 18px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-section-label {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.04em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: var(--blueberry); margin-top: 22px; margin-bottom: 10px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-section-label:first-of-type { margin-top: 0; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-line {<!-- [et_pb_line_break_holder] --> display: flex; justify-content: space-between; gap: 12px;<!-- [et_pb_line_break_holder] --> padding: 7px 2px; font-size: 14.5px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-line-name { color: #4a4568; }<!-- [et_pb_line_break_holder] --> .rkn-tog-line-amount { font-weight: 600; font-variant-numeric: tabular-nums; white-space: nowrap; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-subtotal {<!-- [et_pb_line_break_holder] --> display: flex; justify-content: space-between; gap: 12px;<!-- [et_pb_line_break_holder] --> padding: 10px 2px; margin-top: 4px;<!-- [et_pb_line_break_holder] --> border-top: 1px solid #e2e0ee;<!-- [et_pb_line_break_holder] --> font-size: 15px; font-weight: 700;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-subtotal .rkn-tog-line-amount { font-size: 15.5px; }<!-- [et_pb_line_break_holder] --> .rkn-tog-subtotal.rkn-negative .rkn-tog-line-amount { color: var(--grapefruit); }<!-- [et_pb_line_break_holder] --> .rkn-tog-subtotal.rkn-positive .rkn-tog-line-amount { color: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-net {<!-- [et_pb_line_break_holder] --> margin-top: 24px;<!-- [et_pb_line_break_holder] --> padding-top: 18px;<!-- [et_pb_line_break_holder] --> border-top: 2px solid var(--blackcurrant);<!-- [et_pb_line_break_holder] --> display: flex; justify-content: space-between; align-items: baseline;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-net-label { font-size: 15px; font-weight: 700; text-transform: uppercase; letter-spacing: 0.03em; }<!-- [et_pb_line_break_holder] --> .rkn-tog-net-amount { font-size: 20px; font-weight: 700; }<!-- [et_pb_line_break_holder] --> .rkn-tog-net-amount.rkn-negative { color: var(--grapefruit); }<!-- [et_pb_line_break_holder] --> .rkn-tog-net-amount.rkn-positive { color: var(--blueberry); }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-synthesis {<!-- [et_pb_line_break_holder] --> margin-top: 18px;<!-- [et_pb_line_break_holder] --> background: var(--blackcurrant);<!-- [et_pb_line_break_holder] --> color: var(--white);<!-- [et_pb_line_break_holder] --> border-radius: 16px;<!-- [et_pb_line_break_holder] --> padding: 24px 26px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-synthesis-label {<!-- [et_pb_line_break_holder] --> font-size: 12px; font-weight: 700; letter-spacing: 0.06em; text-transform: uppercase;<!-- [et_pb_line_break_holder] --> color: var(--grapefruit); margin-bottom: 10px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-fcf-row {<!-- [et_pb_line_break_holder] --> display: flex; justify-content: space-between; align-items: baseline;<!-- [et_pb_line_break_holder] --> margin-bottom: 12px;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-fcf-name { font-size: 15px; }<!-- [et_pb_line_break_holder] --> .rkn-tog-fcf-amount { font-size: 22px; font-weight: 700; }<!-- [et_pb_line_break_holder] --> .rkn-tog-fcf-amount.rkn-negative { color: var(--grapefruit); }<!-- [et_pb_line_break_holder] --> .rkn-tog-fcf-amount.rkn-positive { color: #9fe6c8; }<!-- [et_pb_line_break_holder] --> .rkn-tog-synthesis-body { font-size: 15px; line-height: 1.6; color: #d8d5ec; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> .rkn-tog-fade {<!-- [et_pb_line_break_holder] --> transition: opacity 0.2s ease;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> .rkn-tog-fade.rkn-tog-hidden { opacity: 0; }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> @media (max-width: 480px) {<!-- [et_pb_line_break_holder] --> .rkn-tog-card, .rkn-tog-synthesis { padding: 22px 18px; }<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><\/style>\n<p><!-- [et_pb_line_break_holder] --><\/head><!-- [et_pb_line_break_holder] --><body><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/p>\n<div class=\"rkn-tog-wrap\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-switch\"><!-- [et_pb_line_break_holder] --> <button class=\"rkn-tog-btn rkn-tog-active\" id=\"rkn-tog-btn-healthy\">Healthy month<\/button><!-- [et_pb_line_break_holder] --> <button class=\"rkn-tog-btn\" id=\"rkn-tog-btn-buildup\">Stock buildup month<\/button><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-card\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-statement-name\">Marty’s Cafe<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-statement-header\">Cash flow statement<\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-fade\" id=\"rkn-tog-body\"><!-- [et_pb_line_break_holder] --> <!-- populated by JS --><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-net\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-tog-net-label\">Net cash flow<\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-tog-net-amount\" id=\"rkn-tog-net-amount\"><\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-synthesis\"><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-synthesis-label\">Free cash flow<\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-fcf-row\"><!-- [et_pb_line_break_holder] --> <span class=\"rkn-tog-fcf-name\">Operating cash flow minus investing spend<\/span><!-- [et_pb_line_break_holder] --> <span class=\"rkn-tog-fcf-amount\" id=\"rkn-tog-fcf-amount\"><\/span><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/p>\n<div class=\"rkn-tog-synthesis-body\" id=\"rkn-tog-synthesis-body\"><\/div>\n<p><!-- [et_pb_line_break_holder] --> <\/div>\n<p><!-- [et_pb_line_break_holder] --><\/div>\n<p><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><script><!-- [et_pb_line_break_holder] -->(function() {<!-- [et_pb_line_break_holder] --> var scenarios = {<!-- [et_pb_line_break_holder] --> healthy: {<!-- [et_pb_line_break_holder] --> operating: [<!-- [et_pb_line_break_holder] --> { name: \"Net profit\", amount: 8000 },<!-- [et_pb_line_break_holder] --> { name: \"Add back: depreciation\", amount: 1200 },<!-- [et_pb_line_break_holder] --> { name: \"Change in payables\", amount: 300 }<!-- [et_pb_line_break_holder] --> ],<!-- [et_pb_line_break_holder] --> operatingTotal: 9500,<!-- [et_pb_line_break_holder] --> investing: [<!-- [et_pb_line_break_holder] --> { name: \"Espresso machine\", amount: -6000 }<!-- [et_pb_line_break_holder] --> ],<!-- [et_pb_line_break_holder] --> investingTotal: -6000,<!-- [et_pb_line_break_holder] --> financing: [<!-- [et_pb_line_break_holder] --> { name: \"Equipment loan drawn\", amount: 4000 },<!-- [et_pb_line_break_holder] --> { name: \"Loan repayment\", amount: -500 }<!-- [et_pb_line_break_holder] --> ],<!-- [et_pb_line_break_holder] --> financingTotal: 3500,<!-- [et_pb_line_break_holder] --> net: 7000,<!-- [et_pb_line_break_holder] --> fcf: 3500,<!-- [et_pb_line_break_holder] --> synthesis: \"Operating cash flow covers the equipment purchase with room to spare. Free cash flow is positive, so the business is funding its own growth this month.\"<!-- [et_pb_line_break_holder] --> },<!-- [et_pb_line_break_holder] --> buildup: {<!-- [et_pb_line_break_holder] --> operating: [<!-- [et_pb_line_break_holder] --> { name: \"Net profit\", amount: 7500 },<!-- [et_pb_line_break_holder] --> { name: \"Add back: depreciation\", amount: 1200 },<!-- [et_pb_line_break_holder] --> { name: \"Increase in inventory\", amount: -11000 },<!-- [et_pb_line_break_holder] --> { name: \"Change in payables\", amount: 1300 }<!-- [et_pb_line_break_holder] --> ],<!-- [et_pb_line_break_holder] --> operatingTotal: -1000,<!-- [et_pb_line_break_holder] --> investing: [<!-- [et_pb_line_break_holder] --> { name: \"Equipment repair\", amount: -300 }<!-- [et_pb_line_break_holder] --> ],<!-- [et_pb_line_break_holder] --> investingTotal: -300,<!-- [et_pb_line_break_holder] --> financing: [<!-- [et_pb_line_break_holder] --> { name: \"Loan repayment\", amount: -500 }<!-- [et_pb_line_break_holder] --> ],<!-- [et_pb_line_break_holder] --> financingTotal: -500,<!-- [et_pb_line_break_holder] --> net: -1800,<!-- [et_pb_line_break_holder] --> fcf: -1300,<!-- [et_pb_line_break_holder] --> synthesis: \"Net profit still looks healthy at $7,500. Operating cash flow has gone negative because cash paid for bulk stock hasn't shown up as an expense yet. Free cash flow is negative, so this month draws down cash reserves rather than adding to them. At $15,000 in reserves, this pattern would give Marty roughly 8 months of runway before it became a genuine problem.\"<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --> };<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> function money(n) {<!-- [et_pb_line_break_holder] --> var abs = Math.abs(n);<!-- [et_pb_line_break_holder] --> var formatted = \"$\" + abs.toLocaleString();<!-- [et_pb_line_break_holder] --> return n < 0 ? \"(\" + formatted + \")\" : formatted;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> function renderSection(label, lines, total) {<!-- [et_pb_line_break_holder] --> var totalClass = total < 0 ? \"rkn-negative\" : \"rkn-positive\";<!-- [et_pb_line_break_holder] --> var html = '<\/p>\n<div class=\"rkn-tog-section-label\">' + label + '<\/div>\n<p>';<!-- [et_pb_line_break_holder] --> lines.forEach(function(line) {<!-- [et_pb_line_break_holder] --> html += '<\/p>\n<div class=\"rkn-tog-line\"><span class=\"rkn-tog-line-name\">' + line.name + '<\/span><span class=\"rkn-tog-line-amount\">' + money(line.amount) + '<\/span><\/div>\n<p>';<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> html += '<\/p>\n<div class=\"rkn-tog-subtotal ' + totalClass + '\"><span>Cash flow: ' + label.toLowerCase() + '<\/span><span class=\"rkn-tog-line-amount\">' + money(total) + '<\/span><\/div>\n<p>';<!-- [et_pb_line_break_holder] --> return html;<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> function render(key) {<!-- [et_pb_line_break_holder] --> var s = scenarios[key];<!-- [et_pb_line_break_holder] --> var body = document.getElementById('rkn-tog-body');<!-- [et_pb_line_break_holder] --> var netAmount = document.getElementById('rkn-tog-net-amount');<!-- [et_pb_line_break_holder] --> var fcfAmount = document.getElementById('rkn-tog-fcf-amount');<!-- [et_pb_line_break_holder] --> var synthesisBody = document.getElementById('rkn-tog-synthesis-body');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> body.classList.add('rkn-tog-hidden');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> setTimeout(function() {<!-- [et_pb_line_break_holder] --> body.innerHTML =<!-- [et_pb_line_break_holder] --> renderSection('Operating activities', s.operating, s.operatingTotal) +<!-- [et_pb_line_break_holder] --> renderSection('Investing activities', s.investing, s.investingTotal) +<!-- [et_pb_line_break_holder] --> renderSection('Financing activities', s.financing, s.financingTotal);<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> netAmount.textContent = money(s.net);<!-- [et_pb_line_break_holder] --> netAmount.className = 'rkn-tog-net-amount ' + (s.net < 0 ? 'rkn-negative' : 'rkn-positive');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> fcfAmount.textContent = money(s.fcf);<!-- [et_pb_line_break_holder] --> fcfAmount.className = 'rkn-tog-fcf-amount ' + (s.fcf < 0 ? 'rkn-negative' : 'rkn-positive');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> synthesisBody.textContent = s.synthesis;<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> body.classList.remove('rkn-tog-hidden');<!-- [et_pb_line_break_holder] --> }, 150);<!-- [et_pb_line_break_holder] --> }<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> var btnHealthy = document.getElementById('rkn-tog-btn-healthy');<!-- [et_pb_line_break_holder] --> var btnBuildup = document.getElementById('rkn-tog-btn-buildup');<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> btnHealthy.addEventListener('click', function() {<!-- [et_pb_line_break_holder] --> btnHealthy.classList.add('rkn-tog-active');<!-- [et_pb_line_break_holder] --> btnBuildup.classList.remove('rkn-tog-active');<!-- [et_pb_line_break_holder] --> render('healthy');<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --> btnBuildup.addEventListener('click', function() {<!-- [et_pb_line_break_holder] --> btnBuildup.classList.add('rkn-tog-active');<!-- [et_pb_line_break_holder] --> btnHealthy.classList.remove('rkn-tog-active');<!-- [et_pb_line_break_holder] --> render('buildup');<!-- [et_pb_line_break_holder] --> });<!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --> render('healthy');<!-- [et_pb_line_break_holder] -->})();<!-- [et_pb_line_break_holder] --><\/script><!-- [et_pb_line_break_holder] --><!-- [et_pb_line_break_holder] --><\/body><!-- [et_pb_line_break_holder] --><\/html>[\/et_pb_code][et_pb_text _builder_version=”4.27.7″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n<h2>Mastering your cash flow<\/h2>\n<p>Cash flow management is about maintaining all three activities \u2014 operating, investing, and financing \u2014 and getting them to work in \u2018sync\u2019 with each other. To get the best use of your cash flow reporting, scrutinise your numbers monthly and assess your current and future cash flow health using <a href=\"https:\/\/www.reckon.com\/au\/blog\/small-business-operations-metrics\/\">reliable metrics<\/a> (quality earnings ratio, free cash flow formula, and cash runway) and forecasting. With a clearer understanding of how cash moves in and out of your operations at each layer, you will be better able to sustain and grow your business.<\/p>\n<p>[\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn how to read a cash flow statement, understand key metrics, and spot cash flow issues before they impact your business.<\/p>\n","protected":false},"author":36,"featured_media":307290,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"<p>Changes to how casual employees can transition to permanent employment are coming this year. The new process adds an employee-driven element, where, depending on certain circumstances, a casual employee can notify their employer of their intention to move from casual to permanent employment.<\/p><p>This is a marked departure from the previous rules, which were entirely up to the employers. So, what does this new process look like, and what does it mean for small businesses?<\/p><p>Let\u2019s go through it.<\/p><h2>Key changes to casual employment rights<\/h2><p>The \u201cClosing Loopholes\u201d amendment has directly changed how casual employees remain casual or transition to permanent employment.<\/p><p>Under the old rules in the National Employment Standard, a casual employee\u2019s employment status was entirely employer-driven. This meant that any conversation or initiation of a casual employee was through the employer's agreement or arrangement.<\/p><p>Now, employees can let their employer know their desire to change their working status, called the employee choice pathway.<\/p><p>Under the employee choice pathway, casual employees can pursue permanent employment by notifying their employers of their intent to change from casual to permanent. The following criteria have to be met before notice can be given:<\/p><ul><li>The employee has been employed for 6 months or more (or for small business, 12 months or more)<\/li><li>The employee believes that they no longer meet the requirements of a casual employee defined under the Fairwork Act 2009<\/li><\/ul><h2>Who is affected by the employee choice pathway?<\/h2><p>The changes have been in effect for medium-large businesses since 26 February 2025. Under the legislation, businesses with 15 or more employees must follow the employee choice pathway procedure.<\/p><p>The changes will come into effect on 26 August 2025 for small businesses (15 employees or fewer). Under the rules of casual employment, an employee may only notify their intent for permanent employment if they have been employed for more than 12 months.<\/p><h2>The process involved<\/h2><p>The employee choice pathway is twofold: a notice of intent to transition from casual to permanent, and the response to that notice. While this may seem simple, a number of factors determine the outcome. First, before a notice can be made to move from casual to permanent, we must look at what defines casual employment status.<\/p><h3>Defining casual employment<\/h3><p>The legal definition of what constitutes casual employment can be found in the Fairwork Act 2009 (15A). This is a rather large document, so for all intents and purposes, casual employment can be simply defined like this:<\/p><ul><li>The employment relationship is not a firm commitment to further ongoing work.<\/li><li>The employee is entitled to casual loading under the rate determined under their agreement, rate, or contract.<\/li><\/ul><p>If you are unsure about the definition of <a href=\"https:\/\/www.fairwork.gov.au\/starting-employment\/types-of-employees\/casual-employees\" target=\"_blank\" rel=\"noopener\">casual employment<\/a>, the Fairwork Ombudsman has materials and resources.<\/p><h3>Giving notice of employment change<\/h3><p>The notice a casual employee gives to their employer about moving to permanent employment requires two factors to be satisfied:<\/p><ol><li>The employee must have been employed for 6 months or more (12 months or more for small businesses), and;<\/li><li>The employee believes that they no longer meet the requirements of casual employment.<\/li><\/ol><p>Here is an example of a notice to demonstrate what this would look like in the workplace.<\/p><blockquote><p><em>Imagine a bartender working casually for over 10 months at a large pub with more than 15 workers. This casual employee has been given more responsibilities in the last few months, including rostering other casuals. The employee has also noticed they work fixed, regular, rostered shifts. With this information and a desire for more security in their employment, they approach their employer with notice to transition from casual to permanent employment.<\/em><\/p><\/blockquote><p>In this example, the employee meets the requirements to give notice and pursue the casual choice pathway. After notice occurs, the employer is required to respond. Let\u2019s take a look.<\/p><h3>Responding to a notice<\/h3><p>Once an employer receives a notice from their employee, they have 21 days to respond. Before a response is made, the employer should consult with the employee about what changes the transition would make to their employment. This discussion should include:<\/p><ul><li>Whether the employee would move to full-time or part-time permanent employment.<\/li><li>The change of hours the employee will work.<\/li><li>When the change of employment will take effect.<\/li><\/ul><p>After a consultation, the employer can accept or reject the notice of employment change.<\/p><h3>Accepting or rejecting an employment change notice from an employee<\/h3><p>When accepting a change, the employer needs to include what has been consulted previously and provide a new written employment agreement with their employee. The changes must immediately be implemented after the acceptance of employment status unless the employer and employee have agreed on a different commencement date.<\/p><p>When it comes to rejecting a notice, employers need a good reason. An employer can justify a rejection of the notice when either of the following circumstances apply:<\/p><ul><li>The employee still meets the requirements of casual employment.<\/li><li>Causes significant changes to the business organisational structure.<\/li><li>It will have a considerable impact on day-to-day business operations.<\/li><li>The change will break existing rules in an award or enterprise agreement.<\/li><li>The change violates recruitment or selection procedures that are protected by law.<\/li><\/ul><p>Accepting or rejecting an employee's notice must be thoughtfully considered, whatever the circumstances, and communication should be clear and concise. If there is a disagreement, it may come down to both sides not effectively communicating. However, dispute resolution procedures are in place if the relationship is beyond solving in the workplace. It also should be noted that <a href=\"https:\/\/www.fairwork.gov.au\/starting-employment\/types-of-employees\/casual-employees\/becoming-a-permanent-employee#protections\" target=\"_blank\" rel=\"noopener\">protections are in place<\/a> against any adverse actions taken in reaction to an employee submitting a notice.<\/p><h2>What happens if there is an employment dispute?<\/h2><p>Any dispute must be resolved first in the workplace. However, if a dispute occurs due to a disagreement about an employee\u2019s employment status, there are a number of avenues that can be explored:<\/p><ul><li>Consultation with the Fairwork Ombudsman<\/li><li><a href=\"https:\/\/www.fwc.gov.au\/issues-we-help\/casual-permanent-status\" target=\"_blank\" rel=\"noopener\">Resolution mediated<\/a> by the Fairwork Commission<\/li><\/ul><p>Unfortunately, if either of these doesn\u2019t remedy the situation, the matter may have to be resolved in court, arbitrated by the Federal Circuit Court.<\/p><h2>The bottom line<\/h2><p>As the changes on the pathway from casual to permanent employment are new, there will be a degree of awkwardness in implementation. What is essential is good communication and honesty when discussing an employee's future in your business. As the date for small businesses to follow the new rules is set for 26 August 2025, there is plenty of time to review your procedures for <a href=\"https:\/\/www.reckon.com\/au\/small-business-resources\/payroll-guide\/workforce-management\/\" rel=\"\">managing your staff<\/a>.<\/p><p>You may find that the new process has new opportunities for <a href=\"https:\/\/www.reckon.com\/au\/small-business-resources\/hiring-staff-process\/traits-good-team-member\/\" rel=\"\">dedicated employees<\/a> to commit fully to your business. Whatever the employee choice pathway brings, ensure you are prepared with proper <a href=\"https:\/\/www.reckon.com\/au\/accounting-software\/payroll\/\">payroll systems<\/a> to navigate the changing landscape.<\/p>","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"categories":[343],"tags":[],"class_list":["post-307287","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-insights"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.1 (Yoast SEO v28.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How to read a cash flow statement: Small Business Guide | Reckon Blog<\/title>\n<meta name=\"description\" content=\"Learn how to read a cash flow statement, understand key metrics, and spot cash flow issues before they impact your business.\" \/>\n<meta name=\"robots\" content=\"noindex, nofollow\" \/>\n<meta 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