Last edited 23 Feb 2021

Cash flow statement

In very general terms, 'cash flow' is the movement of income into and expenditure out of a business (or other entity) over time. If more money is coming into the business than is going out of it, cash flow is said to be 'positive'. If more money is going out, this is negative cash flow.

In construction however, the term 'cash flow' typically refers to an analysis of when costs will be incurred and how much they will amount to during the life of a project.

A cash flow statement (or statement of cash flows), is a reporting mechanism used to show the amount of cash (and cash equivalents) going in (cash inflow) and out (cash outflow) of a business or project. In basic terms, the cash flow statement sets out the extent to which the business or project has enough cash to fund its operating expenses and meet its debt obligations.

In accounting, the cash flow statement is often used to complement the balance sheet and income statement, and is helpful for determining short-term viability. It also helps provide an indication of the amount and timing of future cash flows.

The cash flow statement is typically split into three areas:

Guidance is available from RICS about cash flow forecasting in the construction industry.

NB The Chartered Institute of Procurement & Supply (CIPS) Glossary of procurement terms, defines cash flow as: ‘The amount of money moving in and out of a business in a particular period.’ It defines a cash flow statement as: ‘An accounting document that summarises the incomings and outgoings of cash in an organisation.’

[edit] Related articles on Designing Buildings Wiki

Designing Buildings Anywhere

Get the Firefox add-on to access 20,000 definitions direct from any website

Find out more Accept cookies and
don't show me this again