Welcome to the Fit Small Business Xero training course! In this lesson, we’re going to cover how to create a cash flow statement in Xero.
You can follow along on your own Xero account. If you don’t have one already, click here to sign up for a free 30-day trial and follow along below.
To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!
Why It Is Important to Create a Cash Flow Statement
A Cash Flow Statement shows the cash coming in and going out of your business during a specific time period, including where it came from and how it was spent. On this report, transactions are categorized into one of the following 3 types of activities:
1. Operating Activities
Cash in or out for the day-to-day running of the business is included in the operating activities section of the report. For example, cash received from customers or payments made to suppliers qualify as operating activities.
2. Investing Activities
The cash flow in or out from purchasing assets for the business, such as equipment; this would include all assets whether they were paid with cash or financed. Any portion of the purchase that was financed would also appear in the financing activities section of the report.
3. Financing Activities
Cash coming in or going out for the purposes of financing all other business activities will appear in this section of the report. For example, any money invested in the business by the owner and loans would qualify as financing activities.
Why You Should Review Your Cash Flow Statement Weekly
Cash flow is essential to staying in business. You must stay on top of your cash flow to ensure that you have enough cash coming in to cover your obligations to suppliers and other creditors. In addition, you want to have enough cash flow to reinvest in your business, which will help you grow.
Cash flow is actually one of 3 reports you should check regularly. The other 2 are your Income Statement and Balance Sheet.
In the how to create an income statement lesson, we discussed the importance of reviewing your income and expenses on a weekly basis to gain insight into trends that have a positive or negative impact on your bottom line. We also discussed the importance of reviewing your assets and liabilities by creating a balance sheet report.
For the rest of this lesson, however, we’ll explore how to create and edit a Cash Flow Statement using Xero. Below is a sample Cash Flow Statement (also known as Statement of Cash Flows) for our fictitious company, Acme Web Pros Plus:
How To Create A Cash Flow Statement
Step 1 – Navigate to Reports
From the Xero Dashboard, click on Reports, select All Reports as indicated below.
Step 2 – Select the Statement of Cash Flows Report
The Statement of Cash Flows report is located in the Financial section as indicated in the screenshot below.
Note: The Statement of Cash Flows is one of many reports that has been redesigned as indicated by the “New” button located to the right of the report.
Step 3 – Select the Date Range of the Report
In the next screen, you can select the date range you would like to run the report for as indicated in the screenshot below.
- Date Range: From the dropdown, select the time period you would like to run the report for.
- Update: Once you have made your changes, click the “update” button to refresh the report.
Below is a sample Cash Flow Statement (Statement of Cash Flows) for our fictitious company, Acme Web Pros Plus:
The Cash Flow Statement can be saved as a PDF, Excel or Google Sheets document. Simply scroll down to the bottom of any report and click on the “Export” button as indicated in the screenshot below.
You can save the Cash Flow Statement as a draft, published or custom report. To do so, click on the “Save as” button as indicated in the screenshot below.
- Draft – “Save as draft” allows you to create a report that you or someone else can make changes to later on. You might create several draft reports before you are ready to publish them.
- Published – Use the “Published” option to save reports when you are finalizing the books for the month or the year. A published report will not change if for some reason the information in the system has been changed. You can only publish reports if you have the Advisor user role.
- Custom – Use this option if you want to save the report format so that you don’t have to recreate it each time you run the report. You can save a custom report as your default report; Xero will give you a prompt for this. We will show you how to save a custom report format in the next section.
How To Modify Report Settings
- Change the Report Title
- Modify the Report Settings
- Rearrange the layout & format
Change the Report Title
You can easily change the title for most of the reports that you create in Xero.
To do this, you need to hover your mouse over the title of the report and you will see the “Edit Title” link appear to the far right as indicated in the screenshot below. Click on that report and make any changes you would like.
In the example below, we changed the title of the report from Statement of Cash Flows to Cash Flow Statement.
Change Report Settings
Depending on the report that you are running in Xero, the report settings will vary. For the Cash Flow Statement, you can change the prior period comparison, gross/net tax options for operating activities and a few other options.
To access report settings, click the blue “Report Settings” link located directly to the right of the date range as indicated in the screenshot below.
Below are the report settings available for the cash flow statement along with a brief description of each.
- Date Range: From the dropdown, select the date range to run the report for.
- Previous period comparison: Enter the number of periods you would like to compare the current report to. For example, if you are running the report for the month of June, you could select 1 in the this field to display the month of May on the report as a comparison.
- Tax: By default, revenue and expense accounts will display gross amounts (tax inclusive) by default; if you would like revenue and expense accounts to display net amounts; select the “Net Tax on Operating activities” option here.
- Numbers: Remove the checkmark if you prefer to see whole numbers (no decimals) on the report).
- Tracking category (region): If you have tracking categories set up then you can click the dropdown and select the categories you would like to display info for on the report. You can learn more about tracking categories here.
- Update: Be sure to click this button to save the changes that you have made to the report to refresh the data.
Rearrange Layout & Format
Edit layout designer allows you to make custom changes to the layout of your reports.
You can make the following changes using this tool:
- Add additional columns for tracking, notes or totals.
- Change account groupings
- Edit formulas
- Rearrange columns by clicking and dragging.
Let’s create a custom report for our fictitious company, Acme Web Pros Plus so you can see how to use this tool.
How To Modify A Cash Flow Statement: Example
Acme Web Pros Plus does not currently have employees. Therefore, they would like to change the line item“Payments to suppliers and employees” to “Payments to suppliers”. Follow the steps below to make this change.
Step 1 – Launch Edit Layout
Scroll down to the bottom of the report and click on the “Edit Layout” link as indicated in the screenshot below.
Below is a screenshot of Edit Layout Designer.
- In this section, you can use the toolbar to change text, add a schedule to the bottom of a report, add a column or add a row to the report.
- In this section, you will be able to see the changes that you make to the report in real time.
- In this section, you will be able to create a formula which we will do next to add a Total column to this report.
Step 2 – Make Modifications to Report
To change the description of a line item on the report, just click directly on the row of the item that you want to change as indicated below.
- Click on the line item that you want to change.
- Type the new description here & click Done.
Below is the updated sample cash flow statement for our fictitious company, Acme Web Pros Plus.
Step 3 – Save the Custom Report Settings.
Scroll down to the bottom of the report and click the “Save As” button and select Custom as indicated in the screenshot below.
- Name: Indicate the report name in this field.
- Default: Put a checkmark in this box if you would like to make this your default cash flow statement report.
- Save: Be sure to click the “Save” button to save the report.