THE CASH FLOW STATEMENT — also called the statement of cash flows — is a crucial financial report for spa owners . It reveals the origins of the spa ’ s cash and how it is being utilized . As the saying goes , cash is king . Understanding the sources of cash inflow offers essential insights for informed decisionmaking . Cash flow management is important to determine whether to invest in new equipment , expand services or hire additional staff , all while ensuring the business remains financially healthy and sustainable .
CASH MONEY The “ cash ” in a cash flow statement includes all cash transactions , such as those made by credit card , check or ACH .
ELEMENTS OF THE CASH FLOW STATEMENT Like all businesses , spas engage in activities that involve both the use and source of cash in three key categories : l Operating activities relate to the day-to-day operations of the spa , such as collecting payments from clients for services provided . Operating cash flow ensures the spa can meet routine expenses like salaries , rent , utilities and supplies . l Investing activities involve the purchase or sale of longterm assets , such as treatment beds or equipment for steam rooms or saunas , as well as reception area furniture . Investing in these assets supports the spa ’ s ability to provide high-quality services but requires significant cash outflows upfront . l Financing activities reflect how the spa raises or returns capital , including issuing stock and taking on loans to fund operations or expansion . It also covers distributions or dividends paid to the owners or investors ( shareholders ).
Collectively , these activities result in either a positive or negative net cash flow , providing a clear picture of the spa ’ s liquidity . Positive cash flow ensures the business can sustain its operations and pursue growth opportunities , while negative cash flow signals the need for better financial planning or cost management .
In the simplified version of the Statement of Cash Flows ( far right ), a streamlined approach focuses on essential cash inflows and outflows to help spas track their liquidity and operational cash flow without the need for advanced accounting knowledge .
ACCOUNTS RECEIVABLE l Tracking real cash flow : The cash flow statement is designed to show actual cash entering and leaving the business . While accounts receivable ( AR ) reflects money owed but not yet received , changes in AR give insight into how much expected cash remains uncollected , affecting the company ’ s available cash . l Adjusting for non-cash transactions : Services or products sold on credit increase AR revenue on the income
The harmony created by positive cash flow ensures that every aspect of the spa — from luxurious treatments to operational expenses — remains in balance , allowing the business to thrive and grow .
FEBRUARY 2025 n PULSE 23