A report that lists all of the adjustments that need to be made to the Net Income figure over a given period to obtain the Change in Cash figure over that same period.
Most businesses report their profit on an accrual basis rather than a cash basis. They recognize revenue when it is earned and costs when they are incurred rather than when cash flows in or out of the business.
For these businesses, a net income to cash flow reconciliation report explains why the reported profit figure is not necessarily reflected in the change to the cash balance by outlining each adjustment that needs to be made to net income in order to arrive at the net cash flow position.
Reconciling your net income to the change in your cash position is an important exercise because:
The cash flow reconciliation report is very important for potential investors in any deal: