Cash Flow Statements

A Cash Flow Statement is a financial report that tracks how cash moves in and out of a startup over a specific period (monthly, quarterly, or annually). Unlike a Profit & Loss Statement, which includes non-cash expenses like depreciation, the Cash Flow Statement focuses solely on actual cash transactions.

Key Sections of a Startup’s Cash Flow Statement:

  1. Operating Cash Flow (Cash from Core Business Activities)
    o Revenue from product/service sales.
    o Payments made to suppliers, employees, rent, utilities, and taxes.
    o Net operating cash flow shows whether daily operations generate or consume cash.
  2. Investing Cash Flow (Cash from Long-term Investments)
    o Purchases or sales of equipment, technology, or real estate.
    o Investment in intellectual property, acquisitions, or startup expansion.
  3. Financing Cash Flow (Cash from Investors & Loans)
    o Cash inflows from investors, loans, or grants.
    o Outflows include loan repayments, dividends, and equity payouts.
  4. Net Cash Flow
    o Operating + Investing + Financing Cash Flows.
    o Shows if a startup is accumulating or burning cash.

Why Cash Flow Statements Matter for Startups

  • Liquidity Management: Ensures the company has enough cash to cover expenses.
  • Investor Insights: Investors assess whether a startup can sustain itself without constantly raising funds.
  • Growth Planning: Helps founders understand whether the business generates enough cash to scale operations.

Since startups often burn cash early on due to high costs and low revenue, monitoring cash flow is critical for survival.

Written by Swedish Ventures, Rolf Olsson. Remarks to this article could be sent to glossary@swedishventures.se.

ASO: DD-03-03