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cash flow statement

cash flow statement

The cash flow statement is one of the most important concepts when it comes to accounting for a company and is usually also known as the ‘ cash flow  statement. ‘ or the Anglo-Saxon word cashflow . Understanding it and having it always under control will be one of the keys for any business, however small, to be really successful in terms of benefits and sustainability. In this article we will explain its fundamental aspects, since it is a very complex concept, especially when it is calculated in the accounting of large companies.


In general, the cash or cash flow corresponds to the money existing in the company’s treasury, to the money available during a period of time for any type of expense. It has to do directly with liquidity and is a very important indicator to know the real health status of a business. A poor cashflow is synonymous with a company in distress, although its macroeconomic accounts are in line.

To understand the essence of the cash flow or cashflow statement, we must have the following formula clear:

Cash. flow statement = benefits + amortizations + provisions .

It is true that this formula is very basic because other factors that influence the cash flow. statement, such as the accrual rule and more accurate before and after taxes, are not taken into account. But in any case, it can be a valid equation for personal economy, for self-employed or small businesses.

The statement of cash flow and financing

Although we will not go into much detail due to the space limitations of the article, it can be affirmed that the cash. flow statement has a close relationship with the financing . In fact, one of the cash flow classes, which is an important part of determining the company’s overall cash flow , is the cash flow from financing activities (FEAF), which indicates the cash available taking into account the account the economic resources coming from loans, the payments made to said credit entities as credit amortization, the payments to shareholders for distribution of dividends, etc.

This relationship between cashflow and financing is a demonstration that financing should not only be a punctual resource for companies, but should be an instrument of habitual use, always within the limits allowed by accounting, as it helps to that the cash flow statement is kept in values ​​that guarantee the sustainability of the company.

The idea that should remain in the mind of every entrepreneur and professional is that a correct state of it flow is essential to be able to meet the business spending objectives. There is no point in accounting that reflects very positive economic results if you do not have the resources to pay payroll for employees, services carried out by suppliers or income to Social Security or Treasury, among other aspects.

Solutions to problems in the cash flow

If the cash flow. statement is not the most appropriate at a certain moment and a payment can not be made, the most important thing is not to panic. With due control from the accounting of the company and on the basis of optimistic but realistic forecasts, you can resort to other solutions. One of them is to request a microcredit from , the amount of which is not excessively high (up to € 750), which does not represent a large financial transaction and can be a good tool for a specific payment (an invoice from light, an unforeseen expense related to the Treasury, etc.).

However, it is very important to carry out a cold analysis of the situation: Why is the cash flow of my company not currently adequate? Is it due to a specific problem, slight and totally remedied in a short time? Or is it a structural problem and these treasury gaps are the general tone? If it is rather this second, your company has a problem: regardless of whether the business is apparently profitable, the truth is that it is not sustainable because it is not able to guarantee a sufficient cash flow to have resources to do against payments.

For all this, we recommend that you surround yourself with good accounting professionals, who can not only perform an audit of your accounts to identify possible errors, but also have a detailed control of your cash movements, calculating your status with a weighted formula of cash flow. And it resorts to financing, such as lines of credit or mini-loans online , as long as they adjust to the economic capacity of your business.