Cash flow statement
Learn what a cash flow statement shows, how to prepare and read one, and how Singapore standards apply.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- A cash flow statement tracks the cash moving in and out of your business, sorted into operating, investing and financing activities
- Operating cash flow shows whether your day-to-day trading brings in more cash than it uses, so start your review there
- Singapore standards allow the direct or indirect method, and from 1 January 2027 the indirect method starts from operating profit
- Compare your statement with net profit and pair it with a forecast to spot cash pressure early
What is a cash flow statement?
A cash flow statement is a financial report that shows the cash coming into and going out of your business over a set period. It’s also called a statement of cash flows.
The statement tracks cash and cash equivalents. International Accounting Standard 7 (IAS 7) treats cash equivalents as short-term, highly liquid investments you can quickly turn into cash. Unlike a profit and loss statement, it leaves out non-cash items such as depreciation.
Think of it as a bank statement for your whole business, with every transaction sorted into categories. You see where the money came from, where it went and what’s left at the end.
What does a cash flow statement show?
A cash flow statement shows where your cash came from and where it went during a period, ending with the cash you have left. It covers these areas.
- Cash generated by your day-to-day operations
- Spending on long-term assets such as equipment
- Funding from loans, debt or owner contributions
- Your opening balance, net movement in cash and closing balance
Who uses a cash flow statement?
Anyone who needs to know whether your business can pay its bills uses a cash flow statement. These are the people who rely on it most.
- Owners and managers planning spending and hiring
- Investors checking whether the business generates cash from trading
- Lenders, such as banks, assessing whether you can repay a loan
- Accountants and bookkeepers preparing year-end financial statements
The 3 parts of a cash flow statement
Every cash flow statement groups cash movements into three sections: operating, investing and financing activities. Each section tells you something different about how your business uses cash.
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Operating activities
Operating activities are the cash your business earns and spends running day to day. They include Goods and Services Tax (GST) settled with the Inland Revenue Authority of Singapore (IRAS).
- Receipts from sales to customers
- Payments to suppliers
- Wages and Central Provident Fund (CPF) contributions
- Tax payments, including GST paid to IRAS
Investing activities
Investing activities cover cash you spend on or receive from long-term assets. They usually include these items.
- Buying equipment, vehicles, property or investments
- Selling assets or investments
A negative investing figure often means you’re putting money into growth, such as new equipment that lifts future output.
Financing activities
Financing activities show how you fund the business through lenders and owners. They include these items.
- Taking out loans
- Repaying loans
- Putting in owner money
- Paying dividends to shareholders
Financing inflows that keep covering losses are hard to sustain, so check that operating cash flow is moving in the right direction.
Direct method vs indirect method
Both methods reach the same net cash from operating activities. They differ only in how they present it.
The direct method lists actual cash receipts and payments, such as cash from clients and cash paid to suppliers. The indirect method starts with profit and adjusts for non-cash items such as depreciation. It also adjusts for changes in working capital, such as movements in trade debtors and trade creditors.
In Singapore, the local accounting frameworks are based on IAS 7 and allow either method.
The indirect method builds on records you already keep, such as your profit and loss statement and balance sheet. SFRS(I) 18 and FRS 118 apply for annual periods beginning on or after 1 January 2027. The related IAS 7 amendment then makes operating profit the starting point for the indirect method.
How to prepare a cash flow statement
To prepare a cash flow statement with the indirect method, you start with profit and adjust it to show actual cash movements. Follow these steps.
- Gather your documents. You’ll need the profit and loss statement for the period, plus your opening and closing balance sheets.
- Start with your profit for the period. For annual periods beginning on or after 1 January 2027, start with operating profit instead.
- Add back non-cash items. Depreciation reduces profit without any cash leaving the business, so add it back.
- Adjust for changes in trade receivables, inventory and trade payables. Subtract rises in receivables and inventory, add rises in payables, and do the opposite for falls.
- Add your investing cash flows. Include cash paid for or received from long-term assets such as equipment.
- Add your financing cash flows. Include new loans, repayments, owner contributions and dividends.
- Total the net movement and check it. Opening cash plus net movement should equal the closing cash on your balance sheet.
Cash flow statement example
Here’s a simplified cash flow statement for a fictional Singapore graphic design studio for the quarter ending 30 June 2026. All amounts are in Singapore dollars (S$).
The studio’s client receipts comfortably covered its running costs.
- Cash received from clients: +S$45,000
- Payments to suppliers: −S$8,000
- Staff wages and CPF contributions: −S$18,000
- GST paid to IRAS: −S$3,200
- Office rent: −S$4,500
- Net cash from operating activities: +S$11,300
The studio bought new computer equipment during the quarter.
- New computer equipment: −S$3,500
- Net cash from investing activities: −S$3,500
It also made one loan repayment.
- Loan repayment: −S$2,000
- Net cash from financing activities: −S$2,000
Adding the sections together gives the studio’s cash position for the quarter.
- Opening cash: S$12,000
- Net movement in cash: +S$5,800
- Closing cash: S$17,800
The studio’s day-to-day work generated S$11,300, which paid for the equipment and the loan repayment with S$5,800 to spare. The investing outflow is planned spending on tools for future projects. If operating cash flow holds at this level, the studio can keep repaying its loan from trading income.
Positive vs negative cash flow
Positive cash flow means more cash came in than went out during the period, and negative cash flow means the reverse. To judge either one, look at where the cash came from.
Positive cash flow
Positive cash flow and profit are separate measures. A new S$50,000 loan lifts your cash balance, for example, even in a quarter when the business made a loss.
Negative cash flow
Negative cash flow can reflect planned investment, such as buying equipment or stocking up before a busy season. Watch the trend: one negative quarter can be part of a plan, while a run of them calls for action.
How to read a cash flow statement
Start with operating activities, because they show whether your core business generates cash. Then compare operating cash flow with net profit for the same period as a quality check.
When operating cash flow regularly trails profit, customers may be slow to pay or stock may be building up. Next, compare each section across several periods: investing outflows often signal growth, while heavy reliance on financing is a warning.
Watch for these early warning signs.
- Operating cash flow falling over several periods
- Loans paying for everyday expenses
- Asset sales funding running costs
- Operating cash flow trailing net profit period after period
If you spot any of these, talk to your accountant early so you have more options to fix it.
Key cash flow ratios to track
Cash flow ratios turn your statement into quick health checks you can compare over time. They sit alongside other liquidity ratios that measure how easily you can pay short-term bills.
- Free cash flow is operating cash flow minus capital expenditure, which shows the cash left to grow or repay debt
- Operating cash flow to net profit is operating cash flow ÷ net profit, which shows how much profit turns into cash
- Operating cash flow ratio is operating cash flow ÷ current liabilities, which shows how well trading cash covers short-term debts
Track each ratio across several quarters to see which way it’s heading.
Cash flow statement vs income statement vs balance sheet
Each of the main financial statements answers a different question about your business. Read together, they explain why profit and cash can differ.
The cash flow statement shows actual cash in and out over a period. The income statement, also called the profit and loss statement, records revenue and expenses when they’re earned or incurred, often before any cash moves. The balance sheet is a snapshot of what you own and owe on a single date.
Say you invoice a client S$20,000 in June and they pay in August. Your June income statement records S$20,000 of revenue, and your 30 June balance sheet shows it as money owed to you. The cash appears on your cash flow statement in August.
Limitations of a cash flow statement
A cash flow statement shows what already happened to your cash, so it works best alongside other reports. Keep these limits in mind.
- It covers past periods only, so it can’t show what’s coming
- It can look stronger in one period if you time payments, such as delaying supplier bills until after period end
- It excludes non-cash investing and financing transactions, such as converting a loan into shares, which IAS 7 requires you to disclose separately
- It measures cash on its own, so you’ll need your profit and loss statement to judge profitability
To look ahead, pair your statement with a cash flow forecast that projects receipts and payments for the coming months.
Why cash flow statements matter for your business
A cash flow statement shows whether you can pay staff and suppliers on time, which keeps your business running. Cash pressure is a common concern for Singapore small and medium-sized enterprises (SMEs).
In the QBE Singapore SME Survey 2025, 51% of SME decision-makers said they were having difficulty managing cash flow and accessing funding, up from 36% a year earlier.
Reviewing your statement regularly helps you:
- spot shortfalls early and plan how to cover them
- time big purchases and hires for months when cash is strong
- notice when receipts slow down, so you can chase overdue invoices sooner
- show banks and investors how cash moves through your business
- keep accurate records ready for GST returns to IRAS if you’re GST-registered, with GST currently 9%
Take control of your cash flow with Xero
Know how much cash you have each day with live cash flow tracking and automated bank reconciliation in Xero. You’ll spend less time on admin and more time planning your next move.
Run a statement of cash flows alongside your other financial reports whenever you need one, and share them with your accountant in real time. Choose the plan that suits your business and get one month free.
FAQs on cash flow statements
Here are quick answers to common questions about cash flow statements for Singapore businesses.
Do small businesses in Singapore need to prepare a cash flow statement?
Under section 201 of the Companies Act, company directors must present financial statements that comply with prescribed accounting standards, such as SFRS. Full SFRS includes a statement of cash flows, but requirements under SFRS for Small Entities differ, so check with your accountant.
How often should you review your cash flow statement?
Review it at least monthly, alongside your bank balance and upcoming bills. If cash is tight or you’re growing quickly, a weekly check helps you act before a shortfall hits.
How do you know if a cash flow statement is correct?
Your closing cash should match the cash and bank balances on your balance sheet for the same date. Finish your bank reconciliation first so every figure ties back to your bank statements.
Can a business survive with negative cash flow?
Yes, for a while, if you have cash reserves or funding to cover the gap. Divide your cash balance by your average monthly net outflow to see how many months of runway you have.
What’s the easiest way to track cash flow?
Use cloud accounting software connected to your bank feeds, so transactions flow in automatically each day. You’ll see your cash position at any time without waiting for month-end.
Related terms
Learn more about cash flow statements
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.