A cash flow statement is an analysis of the realised liquidity development. This analysis is often done by means of the indirect method, which means that, based on the results of the P&L and balance sheet items, how the cashflows have gone through the company in a given period.
Applicability for SMEs
Where large companies have more structure in the running of things, the practice of SME’S is generally more erratic and the predictability of the future is less good. So the question is whether the outcomes of a cash flow statement from the past can be used as a fundamental basis for the prediction of the cashflow forecast within the practice of SMEs?
Direct method more applicable
At CashController’s we think not. The capriciousness of SME’S is so great that we prefer the direct method, in which you can see from week to week how the cashflow develops and how you can manage your money flows to ensure that you can achieve even more growth.
