Navigating Consolidated Cash Flow Statements for Financial Clarity

December 11, 2023

In today’s fast-paced business environment, consolidated cash flow statements are a powerful tool for stakeholders and decision-makers to gain insights into the company’s overall financial health. Knowing how to consolidate cash flow statements is therefore a must to save time, make informed business decisions and contribute to your company’s growth.

What is a consolidated statement of cash flows?

Consolidated cash flow statements are aggregated results that are prepared from the consolidated financial statements. Accordingly, by including information about associate and subsidiary companies, as well as joint ventures, they report a company’s overall financial performance. Hence, consolidated statements of cash flow provide crucial information as to whether a business is generating enough cash to meet the requirements of day-to-day operations.

Cash Flow statements and financial visibility

Consolidated statements of cash flow deliver accounting information in one statement, representing the total cash inflows and outflows for the entire business. Thus, this single view is more effective than reviewing each cash flow statement separately. This enhances financial visibility by making the business’s key financial information easily accessible to its financial leaders, allowing them to accurately estimate future performance.

Consolidated cash flow statements: benefits and challenges

Consolidated cash flow statements offer accurate and up-to-date information that contributes to enhanced, data-driven decision-making. Below are some additional advantages:

  • The consolidated statement of cash flows document provides a holistic perspective that enables better strategic planning and the identification of potential areas for improvement.
  • It simplifies analysis for CFOs and controllers, allowing them to compare and combine the cash flow statements of subsidiary companies.
  • The report can be viewed in any currency so that specific figures can be obtained to analyze the underlying transactions.
  • Since it is not prepared from the individual entities, no elimination is necessary.
  • They track cash in and cash out of the business.

However, the process involves certain challenges and considerations associated with aspects such as standardization and centralization, data volumes, multiple currency transactions, manual processes, or external factors such as changing reporting requirements. The good news is that these issues can be addressed by choosing the right cash flow forecasting software, which can draw data from multiple sources to combine into accurate statements.

Implementing consolidated cash flow statements

To create accurate consolidated cash flow statements, it is advisable to implement a flexible, user-friendly cash management software solution that offers the following:

  • Single platform to manage accounting and financial operations.
  • Suitable to meet the strategic and multidimensional challenges of decentralized companies.
  • Accurate and up-to-date visibility for better forecasting.
  • Integration of cash management functions: forecasting, account-to-account transfers, currency reconciliation, current account management, etc.
  • Automation and streamlining of complex processes and time-consuming tasks such as manual processes.
  • Regulatory management functions, including scalability and responsiveness to comply with current accounting standards.

If you want to improve visibility and control over your cash position, Talentia offers a modular cash flow management solution that is fit to meet the needs of any business.