Cash flow has often been described as the oxygen of business finance. It will show you when more cash will leave the business than come in.

A cash flow forecast is essential for business survival. It may be used for short term planning, for example to see when more cash than usual is needed in a month when several large bills are due and the cash in the bank is likely to be low.

If the business has plans to expand, use the forecast to find where too little cash flow could break the business.

A cash flow statement will also reflect how much money is required for establishment costs and is critical to get future finance.

The cash flow statement can be divided into three categories:

• Operating day to day activities including receipts from sales income and payments for expenses and employees
• Investment activities including payment for purchase of plant, equipment and property
• Financing activities including money borrows or pays back to owners and lenders
  Speak to your accountant or business adviser to seek help in preparing the cashflow statement for your small business.