Cash Flow
Cash Flow Statement for a Small Business: South African Guide
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- FinReady SA
- Published
- Last updated:
- Reading time
- 4 min read
The short answer
A cash flow statement shows the actual cash that came into and went out of your business over a period, split into operating, investing and financing activities. It starts with your opening cash balance and ends with your closing balance. It matters because a business can show a profit and still run out of cash if customers pay late, stock piles up or loan repayments are high.
On this page
- What does cash flow mean?
- Cash flow vs profit
- The three sections
- Operating activities
- Investing activities
- Financing activities
- Opening and closing cash
- Why profitable businesses run out of cash
- Cash-flow forecasting
- Managing late-paying customers
- Supplier payments
- VAT considerations
- Funding and tender implications
- Frequently asked questions
What does cash flow mean?
Cash flow is the movement of money in and out of your bank accounts and till. Positive cash flow means more came in than went out; negative means the opposite. Unlike profit, cash flow only counts money when it actually moves.
Cash flow vs profit
| Profit | Cash flow | |
|---|---|---|
| Sale invoiced in March, paid in May | Counted in March | Counted in May |
| R200,000 bakkie bought cash | Only depreciation (e.g. R40,000/yr) is an expense | Full R200,000 out |
| R100,000 loan received | Not income | R100,000 in |
| Loan capital repayment | Not an expense (only interest is) | Cash out |
| Stock bought but not sold | Not yet an expense | Cash out |
Key takeaway
Profit tells you whether the business model works. Cash flow tells you whether you can pay the bills this month. You need both.
The three sections
Operating activities
Cash from your day-to-day trading: customer receipts, supplier payments, salaries, rent, tax payments. This is the most important section. Consistently negative operating cash flow is a warning sign.
Investing activities
Buying or selling long-term assets: vehicles, equipment, property, investments.
Financing activities
Loans received and repaid, owner capital put in, and dividends or drawings taken out.
Opening and closing cash
Opening cash + net operating + net investing + net financing = closing cash. The closing figure should match your bank balances.
Example: a Johannesburg printing business, April
- Opening cash: R48,000
- Received from customers: R182,000
- Paid to suppliers (paper, ink): R(71,000)
- Salaries, PAYE and UIF: R(58,000)
- Rent, electricity, data: R(19,500)
- VAT paid to SARS: R(14,200)
- Net operating cash flow: R19,300
- New printer bought: R(65,000) (investing)
- Equipment loan received: R50,000; loan repayment R(4,800) (financing)
- Closing cash: R47,500
Hypothetical figures. The business was profitable in April, yet cash fell slightly because of the printer purchase.
Why profitable businesses run out of cash
- Customers, especially large companies and government, take 30 to 90 days or longer to pay
- Growth requires buying stock and paying staff before the customer pays
- Assets bought from cash rather than financed
- Loan capital repayments that do not appear in the profit and loss
- Lumpy SARS payments: VAT, provisional tax, PAYE
Cash-flow forecasting
A forecast is a cash flow statement for the future. Build a simple monthly table for the next 3 to 12 months: expected receipts by customer, known payments (rent, salaries, loans, SARS) and planned purchases. Update it monthly with actuals. Base it on real history from your bank statements so it stays honest.
Managing late-paying customers
- Agree payment terms in writing before work starts
- Invoice immediately and correctly, with your banking details and order number
- Ask for deposits on large or custom jobs
- Follow up a few days before the due date, not weeks after
- Keep a debtors list and review it weekly
Supplier payments
Negotiate terms that match your customer terms where you can. Paying on time keeps relationships and credit available, so avoid using suppliers as an unplanned overdraft.
VAT considerations
If you are VAT registered, the VAT you collect on sales is not your money. Many businesses set it aside in a separate account so the VAT payment does not cause a cash crunch. Your tax practitioner can explain how your VAT category and invoice basis affect timing.
Funding and tender implications
Lenders look at operating cash flow to judge repayment ability. Tender committees may look at it to judge whether you can carry costs before the state pays. A clear cash-flow history and forecast strengthens both. See sefa funding requirements and tender financials.
Frequently asked questions
About FinReady SA
FinReady helps South African businesses organise financial information and prepare clearer draft management information for business decision-making and professional review. Our guides explain the paperwork behind funding, tenders and everyday business finance in plain language.
FinReady provides educational information and tools that help businesses organise financial information. It does not replace professional accounting, tax, legal, audit or financial advice. Requirements differ between institutions and circumstances.