Meaning
Financial summaries detailing the specific destination and amount of every dollar moved during a closing provide a verifiable audit trail for participants. This document, known as the funds flow statement, identifies the bank account for every recipient of the proceeds.
Transaction Accounting
Detailed ledgers show the movement of gross proceeds through several layers of deductions, taxes, registration fees and expenses. The funds flow statement acts as the final instruction to the bank or the escrow agent for the wiring of money. Every row in the document corresponds to a specific bank account and a specific legal obligation.
Wire Authorization
Authorization of the final payments depends on the accuracy of this document as signed by all major parties. A single error in a routing number or a decimal point causes a failure in the settlement process. Parties rely on the document to ensure that senior debt is paid before any junior equity holder receives cash.
Reconciliation Discipline
Reconciling the actual bank transfers against the planned flow occurs immediately after the closing. This practice identifies missed payments or banking fees that were not anticipated in the original draft. Successful reconciliation provides the proof required to close the books on the deal.
