Cash flow statement template and step-by-step guide

If you’re trying to stay ahead of cash shortages, prepare for growth, or simply keep your books clean, a cash flow statement template gives you a clear, structured way to track how money moves through your business.

This guide includes a free cash flow statement template along with step-by-step instructions for filling it out. You’ll also learn the difference between direct and indirect cash flow methods, how to interpret operating, investing, and financing activity, and how to spot early warning signs in your cash flow.

What is a cash flow statement?

A cash flow statement shows how cash enters and leaves your business during a specific period, usually monthly, quarterly, or annually. It’s organized into three sections: operating activities, investing activities, and financing activities.

Unlike income statements or balance sheets, cash flow statements only track actual cash movement, not non-cash accounting items. This is why a business can show strong revenue on paper yet still run low on cash. A template helps you break cash activity into clear categories so you can quickly spot trends, gaps, and opportunities.

Components of a cash flow statement template

A cash flow statement template is typically organized into three main sections, each capturing a different type of cash movement in your business:

1. Operating activities: Cash generated or spent through day-to-day operations, such as customer payments, supplier costs, payroll, rent, and other recurring expenses
2. Investing activities: Cash used to buy or sell long-term assets like equipment, property, or financial investments
3. Financing activities: Cash received from or paid to lenders and investors, including loan proceeds, debt repayments, and dividends

Understanding these sections helps you read the template correctly and makes it easier to pinpoint where cash is coming from and where it’s being used.

Cash flow statement example: 12-month sample

Below is a sample 12-month cash flow statement showing how these three sections roll up into total cash flow for the year. Reviewing a completed example can help you visualize what your own template should look like as it fills in over time.

Benefits of a cash flow statement

A cash flow statement gives you day-to-day visibility into how cash moves through your business. Key benefits include:

• Spotting cash gaps early: Track upcoming shortages before they impact payroll, supplier payments, or operations
• Strengthening financial planning: Identify patterns that inform better budgets, forecasts, and spending decisions
• Evaluating growth readiness: Understand whether operations generate enough cash to support hiring, expansion, or investment
• Supporting financing conversations: Lenders and investors rely on cash flow trends, not just profit, to assess stability
• Improving operational discipline: Clear visibility helps leadership make faster, more confident financial decisions

Don’t assume cash flow management only matters when times are tough or that it’s solely an accounting function. Whether through a 30-day or 12-month cash flow statement template, accurate cash insight helps leadership make faster, more informed decisions and avoid preventable financial stress.

Types of cash flow statements: Direct vs. indirect method

You can create a cash flow statement using either the direct or indirect method. Both approaches lead to the same ending cash balance, but they differ in how they present operating cash flow.

Direct cash flow method

The direct method lists actual cash receipts and payments, such as customer payments, supplier costs, wages, and taxes. It offers a clear view of where cash comes from and where it goes, making it useful for planning and analysis. However, it can take more time to prepare and works best for businesses with straightforward cash activity.

Indirect cash flow method

The indirect method starts with net income and adjusts for non-cash items, such as depreciation and amortization, and changes in working capital. It’s faster to prepare because it uses data already pulled into your accounting system and is the format most auditors prefer. This method also aligns with GAAP.

Direct vs. indirect cash flow method comparison

Either method will give you an accurate view of cash flow. What matters most is choosing the format that best matches your operations and reporting needs.

How to create a cash flow statement

You can prepare a cash flow statement in five steps. The process is the same whether you use the direct or indirect method—the difference lies only in how you calculate cash flow from operating activities.

Step 1: Gather your financial data

Choose the time period you want to analyze and collect your bank statements, income statements, balance sheets, AP reports, and AR records. Start by noting your beginning cash balance for the period. This is the baseline you’ll measure changes against.

Step 2: Calculate cash flow from operating activities

Use either the direct or indirect method to calculate CFO:

• Direct method: List cash inflows (such as customer payments) and cash outflows (such as supplier payments, payroll, rent, and taxes)
• Indirect method: Start with net income and adjust for non-cash items and changes in working capital

Example (direct method):

• Cash inflows: $90,000
• Cash outflows: $75,000
• Net operating cash flow: $15,000

Example (indirect method):

• Net income: $50,000
• Non-cash adjustments: +$8,000
• Working capital changes: –$16,000
• Net operating cash flow: $42,000

Step 3: Calculate cash flow from investing activities

Record cash used to buy or sell long-term assets such as property, equipment, or securities.

Example: Buying equipment for $20,000 and selling old machinery for $5,000 results in net investing cash flow of –$15,000.

Step 4: Calculate cash flow from financing activities

Track cash received from or paid to lenders and investors, including loan proceeds, repayments, and dividends.

Example: Receiving a $30,000 loan and repaying $5,000 produces financing cash flow of $25,000.

Step 5: Calculate net cash flow

Add operating, investing, and financing cash flows together to determine your net cash flow for the period.

Example:

• Operating cash flow: $42,000
• Investing cash flow: –$15,000
• Financing cash flow: $25,000
• Net cash flow: $52,000

A positive number indicates growing cash reserves, while a negative number signals cash burn. Using a cash flow statement template can make this process easier by automating many of the calculations.

Cash flow statement templates

A cash flow template makes it easy to track, analyze, and forecast your cash position without building a spreadsheet from scratch. Choose the format that matches your reporting needs:

12-month cash flow statement template

Ideal for annual planning and board-level reporting, this template includes:

• Monthly inflow/outflow columns
• Pre-built formulas for operating, investing, and financing totals
• Automatic year-end summaries
• Space for notes and one-time adjustments

Use it when you need a long-view perspective on trends, seasonality, and future cash requirements.

Monthly cash flow template

Best for businesses with frequent transactions or tight margins, this version includes:

• Detailed line items for collections, payments, payroll, loan activity, and capital expenditures
• Automatic month-over-month variance tracking
• Weekly or monthly update cadence

Use it to catch cash issues early and make quick operational adjustments.

Simple cash flow template for small businesses

A streamlined version designed for startups and small teams, featuring:

• High-level operating, investing, and financing categories
• Minimal inputs—no complex formulas
• Fast setup and easy monthly updates

Choose this template when you need clarity quickly without the complexity of a full accounting workflow.

How to update and maintain your cash flow statement template

A template works best when it’s updated consistently and reflects real cash activity, not assumptions. Follow these best practices:

• Record inflows and outflows on a regular schedule (weekly or monthly)
• Use actuals whenever possible, especially for short-term planning
• Review unusual movements to spot errors, anomalies, or early warning signs
• Include seasonal or one-time expenses such as insurance premiums or tax payments
• Avoid mixing cash and accrual data, which leads to misleading totals
• Keep AP/AR data current, including vendor invoices and customer payments
• Incorporate simple forecasts to anticipate slow periods, investments, or revenue changes

A well-maintained template becomes a powerful tool for preventing cash surprises and guiding spending decisions.

Key cash flow metrics to track

Once your cash flow statement is complete, shift your focus to interpreting the results instead of simply reviewing them line by line. The metrics below help you evaluate liquidity, operating strength, and overall financial stability.

• Operating cash flow ratio: Measures whether your business generates enough cash from operations to cover short-term liabilities
• Free cash flow: Shows how much cash remains after operating expenses and capital investments, indicating your capacity to reinvest or pay down debt
• Cash flow margin: Reveals how effectively you convert revenue into cash by comparing operating cash flow to total revenue

These metrics provide a clearer view of your financial health than profit alone and can help you spot issues before they impact daily operations.

4 warning signs your cash flow may be weakening

Even with positive trends, cash flow issues often begin quietly. Understanding how early warning signs can appear in your cash flow statement enables you to respond before problems escalate. These signs often appear gradually, and catching them early can make a meaningful difference in your financial stability. Watch for:

1. Declining operating cash flow: A steady drop in operating cash flow suggests your core business isn’t generating enough cash to support day-to-day needs
2. A widening gap between net income and cash flow: Growing separation between profit and cash often indicates weak collections, rising non-cash adjustments, or aggressive revenue recognition
3. Rising accounts receivable or inventory: Increasing AR or inventory ties up cash that should be available for operations and may signal slow collections or poor demand forecasting
4. Reliance on financing to cover shortfalls: Leaning on loans, credit lines, or investor funding to pay for routine expenses is a sign that operations aren’t self-sustaining

Spotting these issues early gives you more time to adjust spending, strengthen collections, or revisit your cost structure before cash tightens further.

Strategies to improve your cash flow

Once you've identified potential gaps or risks, the next step is taking action. The strategies below offer practical ways to stabilize cash flow and strengthen day-to-day operations.

• Speed up invoice collections: Shorten payment cycles by sending invoices promptly and following up consistently
• Offer early-payment incentives: Discounts encourage customers to pay sooner and free up cash faster
• Reduce discretionary spending: Cut nonessential expenses to increase short-term liquidity
• Automate AP and AR workflows: Automation eliminates bottlenecks and improves cash predictability
• Build a cash reserve: Set aside funds to cushion unexpected costs or seasonal downturns
• Update forecasts regularly: Frequent forecasting helps you anticipate needs and plan ahead with confidence

Using Ramp’s free cash flow statement templates

Managing cash flow effectively helps ensure your business stays resilient and ready for growth. A clear cash flow statement gives you visibility into how money moves through your business and where adjustments may be needed.

Ramp makes cash flow tracking significantly easier by bringing all your spending, payments, and financial data into one place. Instead of juggling spreadsheets or waiting on manual updates, you get real-time insights that reflect your company’s actual activity. This makes your cash flow template more accurate and useful, especially when you’re updating forecasts or preparing reports.

Whether you’re modeling scenarios, reviewing trends, or preparing for leadership conversations, you can download Ramp’s free cash flow statement templates to integrate directly into your existing financial workflows.

Download Ramp’s free cash flow template.