The phase “Cash is King” emphasizes the importance of cash flow for a business. Insufficient cash flow can result in the failure of the business so it is important to monitor and manage cash flow. QuickBooks provides a Statement of Cash Flow report to help monitor cash flow for your business. QuickBooks classifies accounts into three categories of activities: operating, investing and financing as you can see on the report below.
You may want to change the categories QuickBooks assigns to accounts. For example, the default for Accumulated Depreciation is as an investing activity (with fixed assets). However, you may want to move it to an operating activity since depreciation is an operating expense. Recently someone asked on the Intuit Community Forum how to reclassify a Line of Credit to Financing instead of Operating Activities. To change how accounts are classified for the Statement of Cash Flows in QuickBooks:
- Login as the Admin user in QuickBooks
- Edit > Preferences > Reports & Graphs > Company Preferences Tab > Click on Classify Cash
- Change account classifications as needed
Use the Statement of Cash Flow to help understand and monitor the cash flow for your business. Talk with your accounting professional or QuickBooks ProAdvisor if you have questions about the Statement of Cash Flow or other topics. You may want to discuss things you can do to improve cash flow, for example:
- Consider collecting deposits or retainers
- Invoice Promptly (email invoices)
- Monitor Accounts Receivable and send reminder notices quickly
- Get paid faster with online payment options or merchant services
- Negotiate with vendors for terms
- Other options — some vary depending on your type of business or industry
Remember — Cash is King!