Cash Flow Statements are an essential tool for any business owner. Learning how to create them with precision and accuracy is a key part of understanding a company’s financial picture. Excel is a powerful tool for modelling cash flow statements, that can save businesses time and make their data analysis easier. This post will cover the benefits of using Excel for modelling cash flow statements and the most important steps to get the job done.

  • Benefits of using Excel for modelling cash flow statements
  • Scope of the post

Key Takeaways

  • Learn the key benefits of using Excel to model cash flows
  • Understand the most essential steps to model cash flows accurately
  • Gain insight into the financial picture of your business

Overview of Cash Flow Statements

Cash flow statements provide an analytical insight into a businesses’ financial-related activities by detailing the company’s cash transactions and plays a vital role in assessing the overall financial position of an organization.

Definition of Cash Flow Statements

In simple terms, cash flow statements can be defined as financial statements that provide an overview of a business’s incoming and out-goings within a particular period. Companies use cash flow statements to assess their liquidity and evaluate whether they have enough cash to fund their short-term and long-term business operations.

Understanding the Elements of a Cash Flow Statement

Cash flow statements are typically divided into three sections covering operating, investing and financing activities which provide a more in-depth insight into the company’s sources and uses of cash.

  • Operating activities includes cash payments and receipts from the routine operations of a business such as wages, taxes, customer collections and payments to suppliers etc.
  • Investing activities encompasses the cash transactions related to buying, selling or facilitating investment assets such as investments in stock, debt instruments, and property; and
  • Financing activities outline the sources and uses of funds that results from the acquisition or repurchase of a company’s own share and economic transactions between a company and its owners, such as issuing or retiring debt, and raises or repaying loans.

Examples of a Cash Flow Statement

A business’s cash flow statement can include a range of diverse cash transactions such as payments towards investments, loans, dividends, capital expenditures and other activities. The statement typically includes the cash amount, its classification, and whether it is an inflow or outflow of cash.

Excel Tools for Modeling Cash Flow Statements

Excel is the most common analysis and reporting tool used when examining the financial performance of a company. A cash flow statement is an essential financial statement that measures the flow of cash into and out of a business and it is especially useful for tracking the performance of cash items over time. Modeling a cash flow statement in Excel allows users to draw insightful conclusions and facilitate better financial decisions. In this article, we will look at the different Excel tools and structures available to help users modeling cash flow statements.

Components of Excel that can be used when modelling cash flow statements

Excel has a variety of tools to help users in modeling a cash flow statement. The two most commonly used features for cash flow modeling are worksheets and formula. The worksheets allow users to organize and input the necessary data in an organized structured. Furthermore, Excel formulas can be used to automate the entire process of creating a cash flow statement. Formulas can be used to calculate net cash flow, operating cash flow, capital purchases, and other financial metrics.

Structured documents available to help model cash flow statements

In addition to the basic Excel tools available to users, there are a variety of structured documents available to help model a cash flow statement. Many of the documents are templates that have the basic components of a cash flow statement already in place. These templates can be found online and they provide a great starting point for users to quickly get up and running with their cash flow modeling. Additionally, there are documents that have step-by-step guidance to help walk users through the entire process of creating a cash flow statement.

Step-by-step guide to modelling cash flow statements with Excel

If you are looking to create a cash flow statement in Excel then the following guide can help you get started. Make sure to begin by gathering the necessary data from your financial records. Next, create a worksheet in Excel and organize the data in different columns. After this, you can use a variety of formulas to automate the process of populating the different fields in your worksheet. Once the formulas are filled in, your cash flow statement is ready and can now be used to draw financial conclusions and incentives.

  • Gather necessary data from financial records
  • Create a worksheet in Excel and organize data
  • Fill formulas to populate different fields in the worksheet
  • Use the cash flow statement to draw financial conclusions

Understanding Key Accounting Principles

Modeling cash flow statements using excel will require the understanding of several accounting principles and assumptions. Although it is not necessary for financial modelers to have a full understanding of the accounting principles and assumptions, it is important to know the essentials to ensure accuracy and comprehensiveness. Thus, this section will provide a brief overview of the cash flow statement principles and assumptions as well as the impacts they have on a cash flow statement.

Identification of Cash Flow Statement Principles and Assumptions

The cash flow statement is based on three primary principles and assumptions, including the accrual principle, the going concern assumption, and the objectivity assumption.

  • The accrual principle requires that transactions be recorded at the time they occur, and not when payment is made or received.
  • The going concern assumption assumes, based on the Company’s track record and performance, that it will operate and generate cash flows into an indefinite future.
  • The objectivity assumption requires that any transaction be based on reasonableness and market prices.

Detailed Explanation of Each Principle and Assumption

The accrual principle is one of the most important concepts in accounting, and it states that income and expenses are to be recorded when they occur, and not when they are paid or received. This principle requires that cash flows from items such as inventory sales, loan interest, and payroll expenses are to be recorded when the sale or service is completed that leads to the generation of the cash flow.

The objectivity principle requires that any transaction be based on market prices and objective facts. This means that transactions shall be made without any bias or favoritism towards any party.

The going concern assumption is based on the idea that a company will be able to generate cash flows for an indefinite period. This is important for cash flow statements because it means that items do not need to be recorded as cash flows if they will take place in a future time period.

Impact of Various Principles and Assumptions on the Cash Flow Statement

The accrual principle and the objectivity assumption have the greatest impact on a cash flow statement. The accrual principle forces a company to record income and expenses when they occur so that cash flows can be accurately estimated. Also, the objectivity principle ensures that the cash flows are calculated fairly and that there is no bias.

The going concern assumption affects cash flow statements by allowing for current liabilities to remain as such instead of being classified as cash flows. This is important because it allows for a more accurate view of how much cash is currently available to the company.

Building a Financial Model

Creating a financial model using Excel is a powerful tool for analyzing and predicting a company’s future cash flow. This process involves gathering relevant data, making assumptions, and formulating a model. In this section, we will review the necessary steps for successfully building a cash flow statement in Excel.

Processing of Necessary Data

The first and most essential step in building a financial model is collecting the adequate data. This includes both the qualitative and quantitative information regarding the financials of the company. This information can be found in the company’s reports, balance sheet, income statement, cash flow statement, and other financial reports. Collecting the right information is critical for creating an accurate model.

Creation of Scenarios and Assumptions

Once the data has been gathered, it is necessary to create scenarios and assumptions from the information. This may include forecasting numbers, such as revenue, expenses, taxes, and other factors. Analyzing actual numbers and developing scenarios will help in predicting the company’s future financial performance.

Formulation of the Financial Model

Once the assumptions have been decided upon, it is time to formulate the financial model. This involves setting up Excel formulas to calculate the expenses, revenues, taxes, and other financial factors. It is important to stay organized and to label each formula clearly.

Explanations of the Financial Model

The last step of building the financial model is to provide explanations for the output of the model. This involves showing the calculation process for each component of the model. Besides the raw data, explanations should cover qualitative assumptions and forecasts as well.

Key Considerations before Modeling Cash Flow Statements

Prior to commencing the modelling of a cash flow statement in Excel, it is important to consider a number of key factors, to ensure the model is meaningful and accurate. These factors include appropriate gathering of the assumptions required to construct the model, identification of key inputs and outputs and awareness of potential data risks.

Appropriate Gathering of the Assumptions Required to Construct the Model

To construct an accurate cash flow statement in Excel, it is imperative to gather relevant and appropriate assumptions, to ensure the model is detailed and accurate. This is likely to include assumptions around cash inflows, cash outflows and the timeline of inputs.

Identification of Key Inputs and Outputs

When modeling a cash flow statement in Excel, it is important to identify the key inputs and outputs. This will enable you to quantify and analyse the accuracy of the model and outputs, thereby enabling you to understand any discrepancies or gaps.

Awareness of Potential Data Risks

It is all too easy to accidentally omit data when modelling cash flow statements in Excel, or to select the wrong data. To avoid this, it is important to be aware of potential risks in the data you are collecting and the model you are constructing. This helps to minimise errors, thereby resulting in a more accurate and meaningful cash flow statement.


This post has provided a detailed overview of the process of modelling Cash Flow Statements with Excel. It covered topics such as identifying the components of a Cash Flow Statement and understanding the difference between operating, investing and financing activities. It also described the benefits that modelling provides in terms of allowing companies to analyze their financial performance and track trends over time.

The process of modelling Cash Flow Statements with Excel consists of several steps, including downloading the financial data and setting up the analysis spreadsheet. It also involves inputting financial data into the spreadsheet, analyzing it, making changes as necessary and creating reports to display the findings. By having a comprehensive analysis of your Cash Flow Statements, organizations can make better financial decisions to continuously improve their financial performance.

The aim of this post was to provide a comprehensive guide on how to effectively use Excel to model Cash Flow Statements. By understanding the process, any organization can easily and accurately assess and analyze their Cash Flow Statements as well as make changes based on their findings for optimal results.

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