By Suzy Payne Rabb   “How can my income statement show I made a profit, when I have no cash?” If I had a nickel for every time I’ve heard this question, I could fill a gallon jar. In the past, I would explain that cash can be used for many things other than the business expenses that show up on the income statement. Cash might be used to invest in assets, payoff of debt or may be distributed directly to the owner or partners in the form of a draw or distribution. These items don’t show up on the income statement, but definitely draw down the cash balance.   The Statement of Cash Flows The Statement of Cash Flows is a primary financial statement and available in most accounting software solutions. This statement shows how changes in the balance sheet accounts and income affect cash, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement presents the movement of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet and should be the report to answer the question. The major problem I’ve seen is that not many business owners use or understand the format of the standard Statement of Cash Flows. While every owner or manager has an interest in where the cash is coming from and going, most find the standard layout difficult to follow and I get it. Here is an example of the standard layout.   Xero’s Cash Summary Report Xero provides a simple Cash Summary Report that is essentially a cash basis income statement, together with some additional sections to show all the other movements of cash by GL account. Simple, direct and far easier for most users to understand. Most small business accounting solutions do not offer such a report. Don’t get me wrong, I still want a Statement of Cash Flows. I just prefer Xero’s Cash Summary report to show the owner exactly where the cash is going. I give Xero’s Cash Summary Report an A++! Schedule a free consultation to learn more about Xero. Suzy Payne Rabb BBA/Accounting Xero Certified Advisor New Day Consulting Group suzy@newdayconsulting.biz 512.892.8990...