Cash Flow – Indirect Method

This report does not present cash inflows and outflows directly. Instead, it starts with net profit, then applies a series of adjustments to arrive at the actual net cash flow.

In other words, it explains how accounting profit is converted into real cash within the business, taking into account items that do not represent actual cash movements.

What is the difference between the direct and indirect methods?

Direct method: shows cash inflows and outflows explicitly (such as receipts and payments)
Indirect method: starts from net profit and adjusts it to calculate cash flow

The indirect method helps you understand:

Why profit does not always equal cash
What factors affected liquidity despite generating profit

How to access the report in Wafeq

To view the Cash Flow report using the indirect method:

Go to "Reports" from the main menu.
Under "Financial Reports".
Select "Cash Flow – Indirect Method".

Note: You can pin the Cash Flow if you use it frequently, making it easier to access quickly. For more information, refer to this guide:

Reports Interface

How is cash flow calculated using this method?

The report starts with:

1) Net Profit

This is the accounting profit generated from the income statement during the selected period

2) Adding non-cash items

Such as:

Depreciation
Any expenses or income that do not involve actual cash movement

These items affect profit but do not represent actual cash received or paid

3) Adjustments for working capital

This includes changes in:

Accounts receivable
Accounts payable
Inventory

These changes explain:

Whether cash has actually been collected
Or is still tied up in unpaid transactions

What does the report show?

This report helps you understand:

Why you may have profit but not enough cash
How unpaid invoices or delayed payments affect liquidity
The relationship between accounting performance and actual cash position

Simple example

Net profit = 100,000
A large portion of invoices has not yet been collected

In this case:

Profit is high
But actual cash is lower

The report highlights this gap by:

Adjusting for uncollected receivables
Showing the real impact on cash

Tracking Data Trends Across Time Periods

Sparklines displayed alongside each line item in the " Cash Flow report" provide a clear visual representation of how values change across the selected time periods, making it easier to identify trends, increases, and decreases at a glance.

Hover over a sparkline to view the value for each specific time period in more detail.

Controlling the Cash Flow report view – Indirect Method

The report provides several tools at the top of the screen to help you control how data is displayed and analyzed based on your needs.

From the top bar, you can:

Set the time period

You can select the time period by choosing a predefined period, entering a custom period, or using the time range slider to adjust the start and end points and select the required months.

Change the currency

Select the currency in which the report is displayed, especially useful if you work with multiple currencies

Add filters

Click Add filter to refine the data by:

Branch
Project
Cost center
Or other dimensions

This helps you analyze cash flow more precisely

Export the report

Download the report using the Export button in formats such as:

PDF
Excel

for further analysis or sharing

Important note

You cannot modify the columns in this report, as it contains fixed fields that are essential for financial reporting.

Comparison Options in Cash Flow report view – Indirect Method

Using the Comparison Options in Profit and Loss reports, you can control how data is displayed and compared with previous periods, as well as define the time unit, the order in which periods are displayed, and the level of detail included in the report.

Show % Change

You can choose how the percentage change is displayed:

Don't Show: Do not display the percentage change.
Month-over-Month: Show the percentage change compared to the previous month.
Quarter-over-Quarter: Show the percentage change compared to the previous quarter.
Year-over-Year: Show the percentage change compared to the same period in the previous year.

Period Unit

You can select the time unit used for the comparison:

Month: Display and compare data on a monthly basis.
Quarter: Display and compare data on a quarterly basis.
Year: Display and compare data on a yearly basis.

Date direction

You can choose how the time periods are arranged in the report:

Oldest to Newest.
Newest to Oldest.

Once the data is displayed, Wafeq allows you to view it in two ways: either by Parent Accounts only, or by Parent and Sub-Accounts.