FerroxLabs Templates and analytical tools only - not personalized financial, tax, accounting, or legal advice. The indirect method assumes accrual basis. Cash-basis filers without AR/AP/deferred-revenue movements should use the direct-method template below. Review with a CPA before sharing externally.
Finance - Cash Flow Statement
Generate a cash flow statement from net income and working capital changes, organized by operating, investing, and financing activities.
Required first prompt - basis of accounting
Ask before generating:
Basis of accounting:
cash/accrual/modified cash- REQUIRED.
- Accrual → use the indirect method (default below). Net income reconciled to operating cash flow via working-capital deltas.
- Cash basis → use the direct method (template at end of this skill). There is no AR/AP/deferred-revenue to reconcile; net income already equals cash from operations from a tax-book perspective. Indirect method on cash-basis books produces nonsense.
- Modified cash → either, depending on which items are accrued; flag each accrued category and reconcile.
The cash-flow header MUST display basis_of_accounting: <selected> and method: indirect | direct.
When to use
- Monthly or quarterly cash flow reporting
- Understanding the difference between profit and cash (a business can be profitable but cash-poor)
- Preparing financials for a lender or investor
- Identifying where cash is being consumed or generated
Inputs
- Period: month (YYYY-MM), quarter (YYYY-Qn), or year (YYYY)
- Net income for the period
- Non-cash items: depreciation and amortization, stock-based compensation (if any)
- Working capital changes (increases/decreases vs prior period):
- Accounts receivable
- Inventory (if applicable)
- Prepaid expenses
- Accounts payable
- Accrued liabilities
- Deferred revenue
- Investing activities: equipment purchases, asset sales (if any)
- Financing activities: loan proceeds or repayments, owner draws/distributions, equity injections
Output format (indirect method)
CASH FLOW STATEMENT - [Period]
(Indirect Method)
──────────────────────────────────────────────────────────────
OPERATING ACTIVITIES
Net income (loss) $XX,XXX
Adjustments for non-cash items:
Depreciation and amortization $X,XXX
Other non-cash items $X,XXX
Changes in working capital:
(Increase) / decrease in accounts receivable ($X,XXX)
(Increase) / decrease in inventory ($X,XXX)
(Increase) / decrease in prepaid expenses ($X,XXX)
Increase / (decrease) in accounts payable $X,XXX
Increase / (decrease) in accrued liabilities $X,XXX
Increase / (decrease) in deferred revenue $X,XXX
--------
Net Cash from Operating Activities $XX,XXX
INVESTING ACTIVITIES
Purchase of equipment / assets ($X,XXX)
Proceeds from asset sales $X,XXX
--------
Net Cash from Investing Activities ($X,XXX)
FINANCING ACTIVITIES
Loan proceeds $X,XXX
Loan repayments ($X,XXX)
Owner draws / distributions ($X,XXX)
Equity injections $X,XXX
--------
Net Cash from Financing Activities ($X,XXX)
──────────────────────────────────────────────────────────────
NET CHANGE IN CASH $XX,XXX
Cash at beginning of period $XX,XXX
Cash at end of period $XX,XXX
──────────────────────────────────────────────────────────────
Direct-method template (cash-basis filers)
For users on cash basis (no AR / AP / deferred revenue movements to reconcile), use:
CASH FLOW STATEMENT - [Period] Jurisdiction: [SELECTED]
basis_of_accounting: cash | method: direct
──────────────────────────────────────────────────────────────
OPERATING ACTIVITIES (cash receipts / payments)
Cash received from customers $XX,XXX
Cash received - other (interest, refunds) $X,XXX
Cash paid to suppliers / vendors ($XX,XXX)
Cash paid for wages / contractors ($XX,XXX)
Cash paid for rent / facilities ($X,XXX)
Cash paid for insurance / software / utilities ($X,XXX)
Cash paid for taxes ($X,XXX)
Cash paid - other operating ($X,XXX)
--------
Net Cash from Operating Activities $XX,XXX
INVESTING ACTIVITIES
Purchase of equipment / assets ($X,XXX)
Proceeds from asset sales $X,XXX
--------
Net Cash from Investing Activities ($X,XXX)
FINANCING ACTIVITIES
Loan proceeds $X,XXX
Loan repayments ($X,XXX)
Owner draws / distributions ($X,XXX)
Equity injections $X,XXX
--------
Net Cash from Financing Activities ($X,XXX)
──────────────────────────────────────────────────────────────
NET CHANGE IN CASH $XX,XXX
Cash at beginning of period $XX,XXX
Cash at end of period $XX,XXX
──────────────────────────────────────────────────────────────
Key cash flow metrics
Free Cash Flow = Operating Cash Flow - Capital Expenditures
Operating Cash Flow Margin = Operating Cash Flow / Revenue
Cash Conversion Ratio = Operating Cash Flow / Net Income
(>1 = cash earnings exceed accounting earnings - healthy signal)
(<1 = profits not converting to cash - investigate working capital)
Cash Conversion Cycle (CCC) = DSO + DIO − DPO
DSO = Days Sales Outstanding = (Avg AR / Revenue) × Days in period
DIO = Days Inventory Outstanding = (Avg Inventory / COGS) × Days in period
DPO = Days Payable Outstanding = (Avg AP / COGS) × Days in period
Lower CCC = working capital is funding the business less; higher CCC = the business is financing customers / inventory.
Common cash flow traps for SMBs
| Trap | What it looks like | Fix |
|---|---|---|
| Profitable but cash-poor | Net income positive, operating cash flow negative | AR collections too slow or expenses paid faster than collected |
| Inventory pile-up | Inventory increase draining cash | Review purchasing pace vs sales velocity |
| Slow AR collection | AR increasing each period | Tighten payment terms; add early pay discount |
| Owner over-drawing | Financing cash flow consistently negative | Review owner draw vs sustainable cash generation |
| Debt service squeeze | Financing outflows consuming most operating cash | Refinance or restructure debt |
Workflow
- Collect inputs (net income, non-cash items, working capital changes).
- Build the cash flow statement.
- Calculate free cash flow and cash conversion ratio.
- Flag any significant negative trends.
- Output the statement with observations.
- Offer to save to
build_report_path("business-finance", "cashflow-<period>.md").
Templates and analytical tools only - not personalized financial, tax, accounting, or legal advice. Generated [DATE]. Jurisdiction: [SELECTED]. basis_of_accounting: [SELECTED]. method: [indirect | direct]. Indirect method assumes accrual basis; cash-basis filers should use the direct-method template. Review with a CPA before sharing externally. Wayland and the plugin authors disclaim all liability for use of these templates.