Cash flow

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  1. Cedent
  2. Cash flow
  3. Third-party debtor
  4. Legal aid in civil proceedings
  5. Statement of defence
  6. Third-party debtor declaration
  7. OPOS
  8. Injunction
  9. Claim amount
  10. Assignment
  11. Direct debit return
  12. Payment extension
  13. Insolvency administrator
  14. Retention of title
  15. Trustee
  16. Consumer insolvency
  17. Standard insolvency
  18. Foreclosure
  19. Payment term
  20. Payment plan
  21. B2C
  22. B2B
  23. Base interest rate
  24. Credit Score
  25. Liquidity
  26. Affidavit
  27. Credit insurance
  28. Factoring
  29. Objection
  30. Foreclosure
  31. Default of payment
  32. SCHUFA
  33. Enforcement Officer
  34. Opposition
  35. Dunning notice
  36. Statute of limitations
  37. Receivable
  38. Enforceable title
  39. Debtor
  40. Creditor
Table of contents:
  1. What is cash flow?
  2. How is cash flow calculated?
  3. What types of cash flow exist?
  4. What does cash flow say about a company?
  5. How is cash flow related to debt collection?
  6. When does debt collection affect a company’s cash flow?

What is cash flow?

The term cash flow describes the total movement of money within a company. It shows how much money was actually received and spent over a specific period of time. This makes it possible to see whether a company is liquid. In other words, whether it has enough funds to meet its ongoing obligations.

Unlike profit, cash flow only looks at actual movements of money. Accounting values such as depreciation or provisions do not play a role. What matters is when money truly arrives in the company’s account or leaves it.

A positive flow of funds means that more money is coming in than going out. The company can use this to pay bills, invest, or build reserves. A negative flow of funds, on the other hand, shows that expenses exceed income, which can lead to financial bottlenecks in the long term.

Cash flow is therefore considered one of the most important indicators for assessing a company’s solvency and financial stability.

How is cash flow calculated?

Calculating the flow of funds is simple. All payments made are subtracted from all payments received over a specific period of time. The result shows how much liquid capital was actually available.

The basic formula is: Cash flow = Inflows – Outflows

In practice, data from the profit and loss statement and the balance sheet are often used. Depending on the type of cash flow, different items are included, for example, income from regular operations, investments, or financing activities.

A high positive flow of funds shows that a company generates enough money to cover ongoing costs and finance new projects. A negative value, however, can indicate financial strain or an imbalance between income and expenses.

What types of cash flow exist?

To better understand where money comes from and how it is used, the flow of funds is divided into three main types:

1. Operating cash flow

This reflects the stream of payments from daily business operations — for example, inflows from customers and outflows for suppliers, rent, or salaries. This category is particularly important because it represents the company’s core activity.

2. Investing cash flow

This includes all movements of money related to investments. Examples include the purchase or sale of machinery, real estate, or shareholdings. A negative value here can indicate that a company is investing in its future.

3. Financing cash flow

This covers payments related to loans, interest, or equity. For instance, when a company takes out or repays a loan, this is reflected in its financing cash flow.

Together, these three areas provide a clear picture of where a company’s funds originate and how they are used, giving insight into its overall financial condition.

What does cash flow say about a company?

Cash flow is a key indicator of a company’s financial health. It shows whether enough money is available to pay invoices, settle liabilities, and make investments.

A stable or positive flow of funds is considered a good sign because it indicates that income exceeds expenses. The company can therefore operate independently without relying on external capital. A negative flow of funds, however, can point to payment difficulties or inefficiencies in business operations.

For creditors, cash flow is especially relevant because it provides insight into a debtor’s ability to pay. A consistent positive flow suggests that invoices can usually be settled on time. A fluctuating or negative trend, by contrast, may indicate a higher risk of default.

The relationship between cash flow and debt collection is close. When customers fail to pay their invoices on time, a gap arises in the payment stream. In other words: money that should be available is missing, and as a result, liquidity declines.

Professional debt collection can help close this gap. By recovering outstanding receivables, funds return to the company, strengthening its financial stability.

In particular, digital debt collection solutions help maintain a steady flow of funds. They automate processes, accelerate payments, and reduce administrative effort. This keeps the company liquid and better able to meet its own financial commitments.

When does debt collection affect a company’s cash flow?

Debt collection affects the flow of funds whenever outstanding receivables exist. As long as customers do not pay, available liquidity decreases. Only when a claim is settled or successfully recovered through a debt collection agency does the company’s financial situation improve again.

The longer an invoice remains unpaid, the greater the impact on the payment stream. Early handover to a debt collection agency can accelerate recovery and prevent cash shortages.

In cases of recurring payment delays, a structured collection process is crucial. It ensures that money flows back into the company in a predictable way, allowing it to cover ongoing expenses without relying on reserves.