What it is
The cash flow statement explains where the hotel's cash came from and where it went in a period. Containn builds it with the direct method, the one recommended by NIF B-2, the Mexican financial reporting standard for this statement. Instead of starting from net income and deducing cash, it takes the actual movements of the cash accounts, which in a hotel come from the daily póliza (journal entry): collections and payments.
Cash accounts are those whose grouping code (código agrupador, the SAT's standard account code; the SAT is Mexico's tax authority) is the one for cash on hand (101) or banks (102).
The cash flow statement does not yet appear under Estados financieros (financial statements), which today shows the income statement and the balance sheet. This article explains the rules it is built with. Meanwhile, every cash receipt and disbursement is in the account ledger of your cash and bank accounts, with its date, its póliza and its description.
How each movement is classified
By its offsetting account: for every póliza that moves cash, Containn looks at which accounts the cash moved against.
| Activity | Offsetting account |
|---|---|
| Operating | Revenue, costs and expenses, plus the day-to-day operating accounts: guests and customers, suppliers, taxes and customer deposits |
| Investing | Fixed assets and intangibles, when bought or sold |
| Financing | Equity (contributions, withdrawals, dividends) and loans |
| Por clasificar (unclassified) | Anything that fits none of the three |
If a póliza moves cash against several accounts at once, the amount is allocated among them in proportion to their weight. A transfer between cash on hand and a bank is not a cash flow: the money neither enters nor leaves the hotel, it only changes account.
Por clasificar is not hidden: it gets its own line, with the account and the amount, instead of being added to operating activities, where it would be least noticed. For example, movements against net financing result accounts (code 7), such as interest, land there: how to present them is your accountant's call.
How it is built, step by step
- Take the cash balance as of the day before the period: that is the opening balance.
- Go through the period's active pólizas that move cash.
- Classify each movement by its offsetting account and add it to its activity, with receipts, disbursements and net per account.
- Receipts minus disbursements of the cash accounts are the net cash flow; opening balance plus net cash flow gives the closing balance.
- Compare that closing balance with the cash on the balance sheet at the same date. The difference must be zero.
When to use it
- At month end and year end, together with the income statement and the balance sheet.
- To explain why the hotel made a profit but has less money in the bank, or the other way around (accrual versus cash).
What can go wrong
- The closing balance does not equal the cash on the balance sheet. The statement is not used until the difference is zero (the cash flow does not tie out).
- A lot under Por clasificar. Check the grouping codes of the offsetting accounts: a misgrouped account does not land in its activity.
- A bank account that does not count as cash. If its grouping code does not start with 101 or 102, it is not treated as cash.
- An opening balance you did not expect. The cash the hotel had when it started on Containn only exists in the books if it was entered in an opening manual póliza.