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Do your own books

Financial statements produced regularly and correctly give key information to continually improve your business.

On this page

  • Profit and loss statement
  • Cash flow statements
  • Financial health of your business with a balance sheet

Small Business Festival Victoria (1-31 August)

Get practical skills and knowledge on financial management for small business from 1-31 August. Find out more here.  

Profit and loss statement

The profit and loss statement (also called an income statement) is a summary of income and expenses for your business over a period of time. It is prepared at regular intervals usually monthly and at financial year end.

Use the below financial statement template to create a profit and loss statement. Add as many categories into the spreadsheet as you need, particularly in the sales revenue and expenses area.

Tips for doing a profit and loss statement:

  • do a profit and loss statement in order to analyse all income and expense categories
  • try to do profit and loss statement monthly - you will get a better understanding of your income and costs
  • recognise areas that need more analysis, and take action before small problems become big problems (e.g. business expenses are increasing so you need to re-price your goods to keep making a profit)
  • learn how to read financial statements, calculate profit and the cost of goods by attending a Financial management workshop.

Financial statements template (XLS 295 KB)XLS icon

Cash flow statement

A cash flow statement is a summary of money coming into and going out of the business for a set time period.  It is prepared monthly and at the end of the financial year.

Use the above financial statement template to prepare a cash flow statement.

Cashflow from operating activities

Operating activities are the day-to-day results of buying and selling of goods and services. They usually include:

  • receipts from income
  • payment for expenses and employees
  • funding of debtors
  • funding to and from suppliers
  • stock movements.

Cashflow from investing activities

Investing activities include investments in future business activities, e.g. buying and selling fixed assets. This type of cash flow can include items such as:

  • payment for purchase of plant, equipment and property
  • proceeds from selling the above
  • payment for a new investment
  • proceeds from selling an investment.

Cashflow from financing activities

Financing activities are how a business finances itself. Examples include:

  • extra money the owners inject into the business
  • money the business borrows
  • money others borrowed from the business they pay back
  • money the owners take out of the business.

Note: Net operating cash flow is the amount of cash that a business has after paying its bills.  If a business has a number of overdue bills, these do not affect the cash flow statement until they are paid in cash. A cash flow forecast will help you measure and monitor how the business is operating.

The cash flow statement can provide helpful warning signals to avoid future financial troubles. Some potential warning signs are when:

  • cash receipts are less than cash payments - you are running out of money
  • net operating cash flow is an outflow - cash flow is negative
  • net operating cash flow is less than profit after tax - you are spending more than you earn.

Balance sheet

The balance sheet is a general snapshot of the financial health of a business on a given day. You would normally complete a balance sheet at the end of a month or financial year.

Once you have a profit and loss statement and cash flow statement you can complete a balance sheet. A balance sheet includes:

  • assets e.g. cash, stock, land, buildings, equipment, money others owe the business
  • liabilities e.g. money owed to suppliers or the tax department, loans, credit card debt
  • net worth - the value of the business after deducting what the business owes (also known as the balance sheet equation or equity).

Accounting packages often offer balance sheet reports. You can also ask your accountant to prepare your balance sheet.

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