A good record of accounts and cash flow are important measures of business success. The average business owner must understand and keep stock of money coming in and going out of a business - income, expenditure, etc.

An accounting system is used to manage the income, expenses and other financial activities of a business. The cash flow statement is known as the statement of cash flows. This is simply the organisation of cash transactions in a business for a particular period. It is the amount of money received and spent in a given month in business. This is different from profit. It includes income, expenditure, assets, investments, etc. The points below highlight the importance of a cash flow statement.

1. A good and balanced financial statement is necessary in order to attract investors.
2. The cash flow is record is useful to detect the amount of income available in a business.
3. It helps a company to generate and maintain a positive cash flow in the long run.
4. Some experts say this record is essential to the survival of a business.
5. It can help predict whether a company has enough finance to fulfil its obligations and be sustained.
6. It shows the changes in the company accounts over time.
7. It helps with financial analysis.

While some small businesses may disregard the essence of a finance record, studies show that an insufficient cash flow is one of the biggest obstacles faced by small businesses. Some businesses end activities because of cash flow problems. Hence, a good finance record is intrinsic to the running of a business. It helps small businesses to know where they stand, and what needs to be done in order to remain in business.

Use the following helpful tips to maintain a good cash flow statement in your business.

• Have a well-organised record of all business transactions.
• Prepare financial statements frequently - weekly or monthly.
• Keep track of fluctuations in cash records.
• Compare cash flow statements with those from previous periods.
• Consult an expert for advisory.
• Be strict with transactions and monitor inventory effectively
• Make prudent expenses
• Write out list of projected financials.
• Always have a budget.
• Maintain a good accounting system and structure.
• Identify possible business financial risks and prepare in advance

Some investors believe that "cash is king". The cash flow statement identifies the cash that is flowing in and out of the company. If a company is consistently generating more cash than it is using, the company will be able to increase its dividend, buy back some of its stock, reduce debt, or acquire another company. All of these are perceived to be good for stockholder value - AccountingCoach.com