Client cash flow statement: which cash flows to look at

In short: in a client's cash flow statement, look first at the cash flow from operating activities: it shows whether ordinary operations generated liquidity or used it up. Then check how trade receivables have changed, and who covered any shortfall: operations or new debts. Only companies with full accounts prepare it; abbreviated and micro-company accounts are exempt.

What the cash flow statement is

The cash flow statement (rendiconto finanziario) is one of the four documents that make up the annual accounts, together with the balance sheet, the income statement and the notes to the accounts (art. 2423 c.c.). Its content is set by art. 2425-ter c.c.: for the year and for the previous year it shows the amount and composition of cash and cash equivalents at the start and at the end of the year, and the cash flows arising from operating, investing and financing activities, including, shown separately, transactions with shareholders.

The accounting standard that explains how it is prepared is OIC 10, issued by the Italian Accounting Body (Organismo Italiano di Contabilità, OIC), December 2016 edition. According to OIC 10, the statement serves to assess the company's financial position, including its liquidity and solvency, and provides information on its ability to meet short-term financial commitments and to self-finance. For anyone granting a payment term, it is exactly the right question: does this company generate the cash with which it will pay my invoices?

On 20 May 2026 the OIC put out for consultation, until 31 July 2026, a draft of amendments to OIC 10 (classification of interest and dividends, factoring, detail of residual items). Until the final version is issued, the 2016 edition applies; according to the draft, the three-area structure remains the same.

Who must prepare it and who does not

• Companies with full accounts: obliged. OIC 10 expressly states that the standard is intended for them.
• Companies with abbreviated accounts: exempt. Art. 2435-bis c.c., second paragraph, provides that those who prepare abbreviated accounts are exempt from preparing the cash flow statement.
• Micro-companies: exempt under art. 2435-ter c.c., which lists the cash flow statement among the documents they do not have to prepare.

In practice: many SME clients file abbreviated or micro-company accounts and do not have a cash flow statement. To see which thresholds decide the form of the accounts and what remains readable, see the guide on abbreviated and micro-company accounts.

The three flows: operating, investing, financing

OIC 10 requires the flows to be presented in three categories, always in this order. Their sum is the change in cash and cash equivalents for the year.

The operating flow is usually calculated with the indirect method: you start from the profit (or loss) and adjust it for items that do not move cash, such as depreciation, and for changes in working capital. OIC 10 explains that an increase in trade receivables is deducted, because they are revenues recorded but not yet collected; an increase in trade payables is added, because they are costs not yet paid.

What to look at in a client you extend credit to

1. The sign of the operating flow. A company in profit can have a negative operating flow, if its customers pay late or if it fills its warehouse. If this happens for two years in a row, the cash to pay you has to come from somewhere else.
2. The change in trade receivables. If receivables grow much faster than revenues, your client is struggling to collect. And those who do not collect tend to pay their own suppliers late.
3. The change in trade payables. If the operating flow holds up only because trade payables have grown, the cash has been found by paying later: suppliers, that is, you too, are financing the company.
4. Who covers the gap. A negative operating flow with a positive financing flow means the year was closed with new loans or with money from shareholders. Transactions with shareholders are, by law, shown separately.
5. The comparison with the previous year. Art. 2425-ter requires the previous year to be shown too: use it to see whether the situation is improving or worsening.

Example with invented figures, simplified: a client closes the year with a profit of 80,000 euro.

The income statement says “profit”, and year-end cash has even risen, but the cash flow statement tells a different story: operations used up cash because receivables exploded, and the year was closed thanks to the bank. Before increasing the payment terms for this client, it is worth asking how it is collecting today.

What to do if the cash flow statement is missing

With abbreviated or micro-company accounts there is no cash flow statement, but you can still derive some signals by comparing two consecutive balance sheets:

• Cash and cash equivalents (item C.IV of assets): even in abbreviated accounts they remain visible, because the abbreviated balance sheet keeps the items with Roman numerals. Comparing two years gives you the net change in cash, without telling you where it comes from.
• Receivables (item C.II) against revenues: if receivables grow faster than revenues, the client is collecting more slowly.
• Debts (item D of liabilities): in abbreviated accounts you see the total and the portion due beyond the following financial year, not the split between banks and suppliers.
• Profit plus depreciation (item B.10 of the income statement): it is only a rough measure of what operations could generate before changes in receivables, debts and inventory. It is not a cash flow statement and must not be presented as one.

If the amount at stake is significant, ask the client directly for a cash flow statement or recent management accounts. If it refuses, that too is information to weigh. To measure the ability to repay debts out of the cash generated, see also the guides on EBITDA and MOL of a client and on the DSCR calculated from the accounts.

Limits to keep in mind

The cash flow statement is a picture of the closed year. The accounts are filed with the Companies Register within thirty days of approval (art. 2435 c.c.), so by the time you read them they may refer to a year that ended many months earlier. Cross-check them with more recent signals, such as protests and proceedings, and with how the client is paying you now. For the full method of reading accounts, start from the practical guide to reading a client's or supplier's accounts; to turn the analysis into a credit amount, see the guide on how to calculate a trade credit line.

Sources

• Art. 2425-ter c.c., cash flow statement (Brocardi.it) (accessed 2026-11-01)
• Art. 2423 c.c., preparation of the accounts (Brocardi.it) (accessed 2026-11-01)
• Art. 2435-bis c.c., abbreviated-form accounts (Brocardi.it) (accessed 2026-11-01)
• Art. 2435-ter c.c., micro-company accounts (Brocardi.it) (accessed 2026-11-01)
• Art. 2435 c.c., filing of the accounts (Brocardi.it) (accessed 2026-11-01)
• OIC 10, Cash flow statement, December 2016 edition (Fondazione OIC) (accessed 2026-11-01)
• OIC, press release of 20 May 2026 on the consultation on amendments to OIC 10 (accessed 2026-11-01)
• Edotto, OIC 10: new draft under consultation on the cash flow statement (accessed 2026-11-01)