Why Founders Should Look at Their Cash Flow Last

Once you’ve reviewed your balance sheet for accuracy and scanned your P&L for performance, it’s time to turn your attention to the final piece of the financial puzzle: your cash flow statement.

This report tracks the movement of actual cash in and out of your business, and it should always be reviewed last.

What Is a Cash Flow Statement?

The cash flow statement tells you how much cash your business had at the beginning of a period, how much came in, how much went out, and what you were left with at the end. It breaks cash activity into three categories:

• Operating activities: Cash from day-to-day business (sales, payments to vendors, payroll).

• Investing activities: Purchases or sales of assets (equipment, vehicles, etc.).

• Financing activities: Loans, repayments, or owner contributions/distributions.

It doesn’t care about invoices, credit card balances, or bills that haven’t been paid yet. It only cares about actual, physical cash movement.

Why Look at It Last?

Because your cash flow report depends entirely on clean data from both the balance sheet and P&L. If bank balances are off or transactions haven’t been categorized properly, the cash flow report becomes hard to follow or, worse, misleading.

For example:

• If you forgot to enter a loan deposit, your cash inflow will look lower than it should.

• If revenue was recognized but the payment hasn’t come in yet, your P&L might look great, but your cash flow will tell another story.

• If you're showing large expenses on your P&L that haven’t been paid, your profitability may look slim, yet your cash flow might show more flexibility.

  
  

By waiting until after you’ve confirmed your balance sheet and P&L are accurate, you’ll know that what you’re seeing in the cash flow report reflects the real movement of money through your business.

What Founders Can Learn From a Cash Flow Report

• Are you bringing in more cash than you’re spending?

• Do you have enough runway to get through the next few months?

• Are cash reserves growing, or slowly draining?

• What’s driving your cash shortages or surpluses?

  
  

Even if your business is profitable on paper, a cash flow shortage can create major problems. This report helps you identify early warning signs before they become crises.

Best Practices for Reviewing Cash Flow

• Compare it to your budget or forecast. Are you tracking as expected?

• Use it to plan. If a large payment is coming due next month, will you have the cash on hand?

• Keep an eye on timing. Revenue doesn’t always come in before expenses go out. Know the gaps.

• Don’t confuse profitability with liquidity. A profitable month doesn’t always mean more cash in the bank.

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Your cash flow report is where reality meets planning. It doesn’t offer projections or performance but rather offers a pulse check on your business’s ability to sustain itself in the here and now.

But to truly trust and use it, you need to review it in the right order: 

Balance sheet first. P&L second. Cash flow last.

Together, these three reports create a complete, reliable picture of your business’s financial health that helps you make better, smarter decisions as a founder.