While most accounting software for business use includes financial reports such as the balance sheet and the income statement, many do not include the cash flow statement. For many churches, this is not a report that is needed for internal reporting purposes. However, if you are preparing financials with the intent of using them to secure a loan, this is an important report that is part of any financial statements that are prepared under GAAP (generally accepted accounting principles). Almost all banks require annual reports prepared according to GAAP.

The cash flow statement eliminates expenses that do not affect cash (i.e. depreciation) and breaks down cash generated and/or used from three separate activities: operations, investing (purchase and sale of assets) and financing (borrowing and repayment of debt).

The information provided on this statement assists a bank (and the church) in determining the amount of debt that a church can reasonably borrow.

There are two different methods of preparing the statement (indirect and direct), which is beyond the scope of this article. We recommend obtaining qualified professional help to review and prepare your financial statements prior to sending them to the bank.  He/she should also be able to anticipate any concerns that the bank may have and prepare an explanation of these or any unusual items in the financial reports.

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