Understanding cash flow statements

Here's something that surprises many business owners: you can be profitable and still go out of business.

How? Say a customer buys goods worth KES 100,000 on credit and promises to pay in 30 days. You record a sale and a profit of KES 20,000. Looks good on paper. But you already paid your supplier KES 80,000 in cash to get that stock. Your bank account is now lower, and you're waiting for payment.

That's the difference between profit and cash flow. Profit is what you'll eventually have. Cash flow is what you have right now.

What Cash Flow Actually Tells You

A cash flow statement is just a list of:

• Money coming in , cash sales, M-PESA payments, bank transfers, customer deposits
• Money going out , stock purchases, rent, salaries, transport, loan repayments
• What's left , your net cash position

It answers one question: do you have enough money to pay your bills this week?

Most Kenyan SMEs fail not because they're not profitable, but because they run out of cash. A customer who pays late, a big stock purchase, an unexpected expense , any of these can break you if you're not watching your cash flow.

How to Read Your Cash Flow (Without the Jargon)

Think of cash flow like your personal finances. You know roughly how much is in your wallet at any time. You know if you can afford to buy something or if you're broke until Friday.

Your business is the same. You just need to look at it regularly.

Positive cash flow means more money came in than went out. You have room to buy stock, pay yourself, or invest.

Negative cash flow means more money left than came in. You need to figure out why , overspending? Slow sales? Customers not paying?

A healthy business has positive cash flow more months than not. If you're negative three months in a row, something needs to change.

Where SokoWise Fits In

SokoWise Accounting builds your cash flow statement automatically from the transactions you already record. Every sale, every expense, every payment , it all feeds into a report you can open in one click.

You don't need to build a spreadsheet or remember what you spent last Tuesday. Just open the cash flow report on your SokoWise dashboard. It shows money in, money out, and the bottom line.

Check it every Friday. If cash is tight, you can delay a non-urgent purchase, follow up with a customer who owes you, or negotiate with a supplier. If cash is healthy, you can plan your next move.

Profit is a dream. Cash is reality. Know both, and your business will be fine.