Cash Flow Statement: How to Read It When You Collect in Dollars

A company can close the year with a profit and still be unable to cover next month's payroll. The reason usually sits in cash: sales not yet collected, inventory bought, debt repaid. The cash flow statement is the financial statement that explains that movement, and when part of the collections arrive in dollars it adds a wrinkle many SMEs overlook.

At Soulbit Academy, this guide closes the CFO Kit, the series on reading the financial statements of a company with dollar revenue. Here we look at the historical statement: what IAS 7 says, how it is built with the direct or indirect method, and where the exchange rate effect shows up. Looking ahead is a different job, covered in the guide to cash flow forecasting with foreign currency revenue.

What the cash flow statement is and which standard governs it

The cash flow statement shows how a company's cash and cash equivalents changed during a period, explaining inflows and outflows by source. The international standard is IAS 7, available on the official IAS 7 page at ifrs.org.

Local rules depend on the country and the type of company. In Colombia, Group 1 companies apply full IFRS, IAS 7 included, through Decree 2420 of 2015 and its amendments, among them Decree 2131 of 2016, which updated IAS 7 with the disclosure initiative. Group 2 companies apply section 7 of IFRS for SMEs. In Mexico, the equivalent is NIF B-2 from CINIF.

What matters to a CFO is what it is for. The income statement measures what the company earned on an accrual basis; the cash flow statement measures the cash that came in and went out. A sale on 60-day terms is already in profit but not yet in cash. So the two are read together, along with the income statement in two currencies.

The three activities: operating, investing and financing

IAS 7 asks for cash flows to be sorted into three activities, and that sorting is what makes the statement readable. Each answers a different question about the company.

Operating activities generate the main revenue: customer receipts, payments to suppliers and employees, and taxes. They answer whether the business produces cash on its own. A persistently negative operating flow means something other than the business is funding the company.

Investing activities include buying or selling equipment, intangibles and other long-term investments. A negative flow is usually healthy if the company is growing.

Financing activities capture changes in equity and borrowings: owner contributions, new debt, repayments and dividends. They show how the company is funded and how much it returns. To weigh that debt, the guide to financial leverage and currency details the ratios.

Direct or indirect method: two paths to the same operating flow

The direct and indirect methods differ only in how operating activities are presented; investing and financing are identical in both. The final result, net operating cash flow, is the same. Table 1 compares them.

Criterion	Direct method	Indirect method
Starting point	Gross receipts and payments by class	Profit for the period
What it shows	How much was collected from customers and paid to suppliers and staff	How profit turns into cash
Adjustments needed	None on profit; needs cash data by class	Non-cash items (such as depreciation) and working capital changes
Value for treasury	Shows customer receipts directly, including dollar collections	Explains why profit does not match cash
IAS 7 position	Encouraged	Permitted

The indirect method starts from figures accounting already produces, so it is simpler to prepare. The direct method separates customer receipts, so you see how much cash actually arrived; how long it takes is measured by accounts receivable turnover with foreign customers.

Which method suits an SME that collects in dollars?

If the accounting system allows it, the direct method gives more treasury information. If you only have a balance sheet and an income statement, the indirect method is the practical route. Your accountant chooses and documents the method; both are valid.

The effect of exchange rates on cash: the line reconciled separately

When a company holds cash in dollars, a change in the rate alters its local-currency equivalent without a single dollar coming in or going out. IAS 7 handles that difference in paragraphs 25 to 28 with a two-part rule.

First: foreign currency cash flows are translated into the functional currency at the rate on the date of each flow. A collection of 10,000 dollars is recorded at the rate of the day it arrives.

Second: unrealised exchange gains and losses are not cash flows. But the effect of rate changes on cash and cash equivalents held in a foreign currency is shown in the statement, in a line separate from operating, investing and financing activities, to reconcile opening and closing cash.

So the statement has four blocks, not three. The fourth is a reconciliation, not an activity: it comes from what happened to your dollar balance, not from what the company did.

For the CFO, the consequence is about reading. If the net flow from the three activities is positive but closing cash fell, the gap may sit in that line, which says nothing about how the business performed.

Worked example: an SME collecting in USD reconciles its cash

An example with labelled assumptions shows how it is built. All figures are hypothetical, in thousands of Mexican pesos, and match no real company or Soulbit prices.

Assumption 1: opening cash is 6,000, of which 1,800 is 100,000 dollars valued at 18.00 pesos per dollar and 4,200 is pesos. Assumption 2: dollar collections are converted to pesos on receipt, so every flow in the period is in pesos. Assumption 3: the dollar closes the period at 17.20 pesos and the 100,000 dollars are held untouched.

Under the direct method, operating activities are:

• Receipts from customers: 31,200.
• Payments to suppliers: minus 12,400.
• Payments to employees: minus 10,800.
• Taxes paid: minus 1,800.
• Net operating flow: 6,200, because 31,200 minus 12,400, minus 10,800, minus 1,800 equals 6,200.

Investing: equipment purchase of 1,600, a flow of minus 1,600. Financing: loan repayment of 1,000, a flow of minus 1,000. Change before the exchange effect: 6,200 minus 1,600 minus 1,000, which is 3,600.

The exchange effect on the dollar balance is 100,000 dollars times a drop of 0.80 pesos (from 18.00 to 17.20), which is minus 80,000 pesos, or minus 80 in thousands.

The reconciliation: opening cash 6,000, plus a change of 3,600, minus the exchange effect of 80, equals closing cash of 9,520. Checking by component: 100,000 dollars are worth 1,720 at 17.20, and the pesos are 4,200 plus 3,600, which is 7,800. Total: 1,720 plus 7,800 equals 9,520.

The reading is plain. Operations produced enough cash to cover investment and debt with 3,600 to spare, and the stronger peso took 80 off the dollar balance. Looking only at the three activities, a CFO would not see why closing cash is not 9,600.

How to read the cash flow statement for treasury decisions

To decide in treasury, compare three figures from the statement: operating cash flow against profit, how that flow covers investment and debt, and the exchange effect against opening cash.

First: operating cash flow against profit. If profit grows and operating cash flow does not, working capital is absorbing cash, usually receivables. The cash conversion cycle measures how many days that takes.

Second: who funds investment. If operating flow covers equipment purchases and debt repayment, the company sustains itself. If it covers purchases only with new debt, it depends on credit.

Third: the weight of the exchange effect. Measure it against opening cash; in the example, 80 over 6,000 equals 1.3%. If that percentage is high or repeats period after period, the company holds a mismatch worth deciding on rather than inheriting. The statement is historical: to decide how much to convert next month, the tool is the forecast.

Does a stablecoin balance count as cash in the statement?

It is an open question for your accountant. IAS 7 defines cash and equivalents with specific conditions, and classifying a USDC or USDT balance depends on its characteristics and the applicable framework. This article does not state that they are cash. The prudent course is to document the decision and apply it consistently. The guide on accounting for USDC under IFRS goes deeper into that debate.

What Soulbit V1 delivers and what it does not for the cash flow statement

Soulbit is a custodial financial platform. It does not prepare financial statements or decide how a balance is classified. Its role is to organise collection and payment movements so your accountant has the input. Table 2 separates what V1 covers from what it does not.

Need	Does Soulbit V1 cover it?	Detail
Collect from customers with a payment link or collection QR	Yes	Collection tied to a link or QR code
Hold a USDC or USDT balance with institutional custody	Yes	Custodial platform: the client does not control the keys
Operate in USD, EUR and GBP	Yes	Fiat balances in those three currencies
Disburse recurring or batch payroll	Yes	With KYB verification and AML/KYT monitoring
Convert to local currency through OTC by quote	Yes, on request	Local bank rail only in Colombia
Prepare the cash flow statement	No	Belongs to the company's accounting
Decide whether a balance is cash or an equivalent	No	Accountant's decision under the applicable framework
Hedge the exchange risk of the balance	No	No hedging instruments in V1

V1 has no local bank rail in Mexico and does not promise yield on balances. Check official channels for card and mobile app availability. OTC conversion is quoted on each transaction. Holding a digital dollar balance does not remove the exchange effect; it moves it to the date you choose to convert.