Proof of cash
Last updated
Quick Answer
Proof of cash reconciles recorded revenue and expense to actual bank activity over a period.1,2
What it is
Operational context
What good looks like
Why It Matters
An earnings figure that cannot be tied to cash is a figure the buyer is financing on faith. Lenders sizing on debt service coverage care about the cash, not the accrual.1
Term Family
Related concepts
Frequently Asked Questions
What is Proof of cash in venture capital?
It is the procedure inside a quality of earnings engagement that tests whether the income statement corresponds to money that moved. Where revenue recognition is aggressive, where cash collection lags badly, or where related-party flows are present, the reconciliation is where it surfaces.
Why is Proof of cash important for startups?
Understanding Proof of cash is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.T3-25 — Warren Averett (CPA firm)What Happens in a Quality of Earnings Analysis?Warren Averett (CPA firm)(Proof of cash reconciles recorded revenue and expense to actual bank activity over a period.)secondary · T3 · diligence-qoe · method
- 2.T3-26 — The Bonadio Group (CPA firm)Common Quality of Earnings AdjustmentsThe Bonadio Group (CPA firm)(Proof of cash reconciles recorded revenue and expense to actual bank activity over a period.)secondary · T3 · diligence-qoe · method
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