Financing cash flow
Financing cash flow covers cash flows from financing, such as new loans, repayments and, under conditions, distributions.
What does financing cash flow mean?
Financing cash flow covers cash flows from financing, such as new loans, repayments and, under conditions, distributions.
The exact classification of interest and dividend follows the reporting rules applied and must be consistent. New debt is not turnover and repayment is not an operating expense.
How does it work?
In the cash flow statement, the financing activities show the receipts and payments with which the company funds its operations and investments: loans drawn, repayments, payments on shares and distributions to shareholders. The classification comes from RJ 360; Book 2 DCC itself does not prescribe a cash flow statement. Only what has passed through cash or the bank counts. A debt converted into shares is financing without a cash flow and therefore does not appear in the statement.
Interest paid and dividend paid each appear on their own line. Up to and including financial year 2026, RJ 360 leaves the choice between operating and financing cash flow, with a preference for the latter for dividend. For reporting years beginning on or after 1 January 2027, both are as a rule financing cash flows (RJ Statement 2026-6).
Example
A carpentry company (BV) takes out a bank loan of € 80.000 and repays € 12.000 on an older loan. The shareholder pays in € 10.000 of share premium and the BV pays € 15.000 in dividend. It pays € 4.200 in interest, which it shows under financing activities. The financing cash flow is 80.000 − 12.000 + 10.000 − 15.000 − 4.200 = € 58.800 positive. Of all these amounts only the interest returns in the profit and loss account; the bank debt rises by a net € 68.000.
In the annual accounts
Cash flow statement, if prepared.
Difference from interest expense
The bank collects repayment and interest together, but only the interest is an expense in the profit and loss account. The repayment reduces the debt on the balance sheet and appears only as an outgoing financing cash flow. Anyone who books the whole annuity as costs shows too little profit and too high a remaining debt.
Common mistakes
- Seeing drawing a loan as profit
- Treating repayment as a P&L expense
What to watch for
- Reconcile every loan: opening balance plus drawdowns minus repayments is the closing balance on the balance sheet. Those drawdowns and repayments appear in the statement.
- Dividend counts in the year of payment. If it has been resolved and approved by the board but not yet paid, it is a debt and not yet a cash flow.
- Micro and small entities do not have to prepare a cash flow statement; medium-sized and large ones do, unless an exemption from RJ 360 applies, such as inclusion in the parent's consolidated statement.
Legal basis and source
RJ 360
Frequently asked questions
Is a repayment deductible from profit?
No. A repayment is the return of borrowed money and not an expense. Only the interest goes into the profit and loss account.
Is a negative financing cash flow a bad sign?
Not necessarily. A company that repays loans and pays dividends out of a generous operating cash flow has a negative financing cash flow. It only becomes worrying when repayments have to come from new credit.
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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