This tutorial provides the steps to run a cash flows report in QuickBooks Online, also referred to as a Statement of Cash Flows. The Statement of Cash Flows is a financial statement that shows the sources and uses of cash over a specified period of time.
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This tutorial is one in our series of Free QuickBooks Tutorials. The step-by-step instructions that follow the video offer screenshots from the most recent version of QuickBooks Online. Although the video was made with a slightly older version of QuickBooks Online, the steps have remained essentially the same.
Why the Statement of Cash Flows Is Important
You can’t stay in business if you don’t have cash to pay your bills. While the income statement is great for looking at the earnings of your business, you need cash to pay bills. Not all earnings reported on an income statement result in immediate cash. For instance, a credit sale to a customer increases earnings, but does not immediately increase cash. Similarly, purchasing equipment uses cash, but won’t immediately decrease earnings because equipment must be depreciated slowly over time.
Remember that earnings and cash flow can be very different, especially when looking at short reporting periods. The Statement of Cash Flows not only reports your sources and uses of cash, but also breaks your cash flow into operating, investing, and financing activities.
Sample Statement of Cash Flows
To demonstrate the components of a cash flow statement, let’s examine a sample statement from our fictitious company, Paul’s Plumbing:
A. Operating Activities
QuickBooks prepares the operating activities section using the indirect method, which starts with net income from the profit and loss statement and applies reconciling items to arrive at cash provided or used by operating activities. While regulators require this reconciliation, placing it in the body of the cash flow statement makes it very difficult for readers to interpret.
The reconciling items are the changes in particular balance sheet accounts during the period. Don’t get hung up trying to understand the reconciliation, Rather, focus on the bottom line of the operating activities section, which is cash provided by operating activities. This is probably the most important number on the cash flow statement since a healthy business must generate positive cash flow, at least over long periods of time.
Interpreting the change in accounts receivable (A/R): Paul’s Plumbing’s A/R increased by $845 in 2020. Why is this increase a negative adjustment on the cash flow statement? The $845 increase in A/R increases revenue used to calculate net income, but it doesn’t increase cash flow. Thus, an increase in A/R is a negative reconciling item.
B. Investing Activities
The investing activities section shows the cash inflows and outflows related to buying and selling assets, except inventory. Paul’s Plumbing paid $95,000 for a building. Total proceeds from the sale of any assets will also appear in this section.
C. Financing Activities
The financing activities section reports cash inflows and outflows related to both debt and equity financing by the company. Paul’s Plumbing received a $7,334.22 investment from the owner. Notice that Paul’s Plumbing didn’t incur any debt financing to help pay for the building shown in the investing section.
D. Change in Cash
The bottom of the Statement of Cash Flows presents the change in cash during the period. Paul’s Plumbing provides an example of how the cash flow statement provides great information beyond just the total change in cash. At first glance, the fact that Paul’s Plumbing cash balance decreased by over $84,000 seems horrible, but by analyzing the cash flow statement we see the reason for the decrease was a $94,000 cash purchase of a building.
How to Create a Statement of Cash Flows in QuickBooks
You can create a Statement of Cash Flows in QuickBooks Online in four steps:
- Click Reports in the left menu and then select Statement of Cash Flows in the Business overview section.
- Change the general report options for your Statement of Cash Flows with the menu bar above your report.
- Click Customize to customize your Statement of Cash Flows further.
- Select an icon in the upper right corner of the Statement of Cash Flows to Email, print, or export your report.
1. Create a new Statement of Cash Flows
Select Reports in the left menu bar and then click on Statement of Cash Flows, which is located at the bottom of the second column of reports in the Business overview section:
2. Set Options for the Statement of Cash Flows
Locate the menu bar above the Statement of Cash Flows by scrolling up. The menu bar provides some general options that can be adjusted for your report:
Choose the following options for your Statement of Cash Flows:
- Report period: Choose the reporting period for which you want to run a Statement of Cash Flows. You can select a predefined time period by clicking on the drop down box or enter the beginning and end dates for a custom period.
- Display columns by: The default Statement of Cash Flows in QuickBooks has one column that displays the total for the reporting period. However, you can add additional columns for interim periods, or columns to split the total into categories such as classes, locations, or vendors.
- Show nonzero or active only: The QuickBooks default is to show only rows and columns that have activity during the period. This is a good setting that will avoid unnecessary clutter in your report.
- Run report: Click Run report to apply your changes.
- Customize: To customize your Statement of Cash Flow even further as discussed in the next step, click Customize.
- Save Customization: You can save your customizations to a new report by clicking Save Customization and naming your report.
3. Customize Your Statement of Cash Flows Further
You can select additional options for your Statement of Cash Flows by clicking the Customize button (item E in the prior section).
The first group of options in the Customize report menu are general options.
In these general options, you can choose to report all values in thousands of dollars and to eliminate cents on your report. You can also choose how to format negative numbers.
The Rows/Columns options for the cash flows report does not include any options beyond those provided above the report and discussed in the last section:
The filter options allow you to filter the report based on five different variables:
If you track activity by class or location, can print your cash flows report filtered by these items. If Location or Class doesn’t appear in your Filter options, you need to turn on Class and Location tracking in your advanced company settings. You can also filter your Statement of Cash Flows by customer, vendor, or product/service.
In the last set of options, you can choose what information to display in the Header and Footer of the Statement of Cash Flows:
You can change the name of the company or the name of the report that will appear in the Header. If you uploaded a logo while setting up your company, you can choose to show your logo at the top of your Statement of Cash Flows.
Once you are done customizing your Statement of Cash flows click the green Run Report button.
4. Print or Email Your Statement of Cash Flows
You can print, email, or export your Statement of Cash Flows with the icons in the top right corner of the report:
- Email: Click the envelope to email a copy of your Statement of Cash Flows without having to leave QuickBooks Online.
- Print: Select the printer icon to print a copy of your Statement of Cash Flows.
- Export: Click the drop-down arrow next to the export icon to choose between exporting your Statement of Cash Flows as a PDF or an Excel spreadsheet.
Congratulations on finishing another QuickBooks Tutorial and learning to create a Statement of Cash Flows in QuickBooks Online. Our next tutorial is How to Run an Accounts Receivable Aging Report.