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Understanding and Troubleshooting Cashflow
Understanding and Troubleshooting Cashflow
Mick Devine avatar
Written by Mick Devine
Updated over a week ago

If you don’t understand where some of your cashflow figures are coming from, or need to track down an anomaly in your Cashflow Forecast, then this help note is for you. Assuming you have already taken appropriate steps to prepare a cashflow forecast, this help note will help you understand the calculations that make up your resulting Cashflow Forecast report.

It is not designed as a step by step guide to cashflow forecasting in Calxa. For assistance in this area please refer to these related help notes:

Calxa Settings That Affect Cashflow

To effectively troubleshoot cashflow you first need to understand what settings affect your cashflow figures. Listed below is an overview of all the settings and terminology that affect cashflow, with some links to associated support material.

Frequently Asked Questions or Common Problems

In this section we will address some of the common questions or problems you may find when preparing a Calxa Cashflow Forecast. All answers or suggestions will reference the settings and terminology listed above, so please ensure you have at least a basic understanding of these settings.

Why does my cashflow not have any values?

Calxa converts budgeted P&L and Balance Sheet movements to cash movements to create your forecast, so no figures suggests there are no budgets to base the calculations on. Check the following:

  • Are you using the correct Budget Version?

  • Did you set the Organisation Budget Consolidation Setting correctly (i.e. is your organisation budget the sum of your business units - projects, departments, jobs, tracking categories, etc.)?

  • Are your budgets entered in the correct year?

    • When reporting across financial years, ensure that all budgets are in the same budget version.

Why are all the cashflow values greater than my budgets?

When you run a P&L report you are reporting on Tax exclusive amounts. The same can be said of your budgets, and they should all be entered exclusive of tax.

When Calxa converts this to your cashflow it will add tax to these budgets where appropriate, because you are collecting or paying for this in cash terms upfront. See How is GST Calculated and Paid? below for more detail.

Why don’t my cashflow figures match my budgets?

The answer is: they rarely should. Many factors affect how your budgets are converted to cashflow movements. It may be that there is tax being applied, or perhaps creditor or debtor calculations are pushing payments or receipts into future months.

In other words, this is the intention - just because you have invoiced $1,000 income in a month does not mean you will collect on those invoices in the same month. The most common default Cashflow Setting is Debtor Days or Creditor Days. If the days count is high, the payments and receipts for a single month’s budget will be spread out across multiple months.

For a visual representation of this calculated payment, have a look at the Debtor Days or Creditor Days profile distribution via the Cashflow (Basic Settings) screen. It will show the receipt or payment profile over 12 months.

To view the days count profiles for individual income or expense accounts open the Cashflow (Advanced Settings) screen.

Debtor Days Cashflow Type

Please refer to What Calxa settings affect cashflow? section above for a comprehensive list of settings and their effect.

Net Assets do not equal Total Equity

When running the Balance Sheet Forecast report, it is possible you might find the Net Assets do not equal Total Equity. This can occur when the budget is not properly balanced.

Calxa will keep the budget in balance for you for the most part, the exceptions being when you budget on accounts with a cashflow type of None or Schedule. Please refer to the Balance Sheet Budget section of Step by Step Guide to Cashflow Forecasting for details on balancing your budget.

See the Balance your Budget with the Budget Discrepancy Analysis Report help note for instructions on how to highlight and analyse any discrepancies you might have.

Special Note

There are a couple of issues that can cause your Balance Sheet to go out of balance that will not appear on the Budget Discrepancy Analysis report.

The first issue occurs when the Wages and Superannuation expense accounts nominated in the Wages & PAYG and Superannuation settings screens have a tax code attached to them in error. You can determine if this is the case by removing these account nominations.

Next, go to the Cashflow Settings screen, and review each account to see if it has a tax code applied. If it does have a tax code applied, change it to N-T for 'no tax' or the equivalent of your accounting system and save your changes. Then go back to the Wages & PAYG and Superannuation settings screens and re-nominate the accounts.

Check tax code on Wages expense

The second issue that can result in the Balance Sheet not balancing occurs when the GST Paid and Collected accounts have not been nominated in the GST settings screen. Furthermore, it is a good policy to review the nominations in all of the Financial Settings screens.

The first month in your cashflow has very large inflows or outflows

Understanding the Problem

Generally, this problem will not occur if you are using the default Cashflow Settings (i.e. Debtor Days/Creditor Days), as the issue normally suggests the cashflow settings are not closely matching reality. This can also occur when there is a large, out of the ordinary, value sitting in your Trade Debtor or Trade Creditor accounts.

For example, let’s assume your Trade Debtor balance is $10,000, and you have set all of your Income accounts to have a cashflow profile of 50% in the current month and 50% in month 1. By setting this profile you are telling Calxa that nothing will be outstanding by month 2. That is an important concept, because Calxa will try to collect on the full debtor balance of $10,000 in the first month.

Let’s look at the same figures another way. If the debtor balance is $10,000, then based on the cashflow settings, we expect the previous month's sales to be something close to $20,000. This is because the cashflow profile says that 50% of a month’s income on average is still outstanding the following month.

If your previous month’s income was only $12,000 it follows that the cashflow settings are not matching reality, because we would then expect a debtor balance of $6,000, and not $10,000. To collect the full $10,000 in your cashflow forecast instead of just $6,000, Calxa will adjust all the calculated inflows by a factor of 10,000/6,000, or approx. 1.6667, to make up for this variation between expected debtors and actual debtors.

The Fix

First you will need to determine if there is a problem with your cashflow profiles or a problem with your debtor or creditor balance(s). If the issue is with the cashflow settings, consider the following.

  • Set the cashflow settings back to the default calculated profile of Creditor or Debtor days.

    • This is a calculated profile and each time you update your data from your accounting system it will adjust accordingly.

  • Adjust your custom profiles to something more realistic.

    • Do you need to make them 40%, 40% then 20% instead of 50% then 50%?

    • Consider if just one account can be adjusted (i.e. is there one account that sits outside the normal profile?).

      • If so, create a profile with a greater spread which more accurately represents the outstanding debtor or creditor on this account.

    • Are there some accounts you have set to 100% current when in reality they should be 90% and then 10%?

If the problem more likely lies in your debtor or creditor balance (like a bad debt), consider the following.

  • Reduce the balance by only nominating your primary debtor or creditor account in the default accounts screen.

    • For example, have you nominated additional debtors/creditors that do not fit with your cashflow profiles.

  • Write off bad debt.

    • Have you got some debtors that are not likely to be collected or are in dispute?

    • Even if you are not prepared to write it off entirely you could create additional debtor accounts and journal the bad debt to the secondary debtor that is not nominated in Calxa.

  • If the majority of the value is from one account, adjust the cashflow profile on this account to match.

  • In extreme circumstances you can isolate strange transactions by giving them their own account and assigning an appropriate cashflow profile.

How is GST/VAT calculated and paid?

GST/VAT will be added to all budgets, where appropriate, based on the Default Tax code set in the Cashflow Settings screen. During the initial import of your organisation these tax codes are set based on the default tax codes applied in your accounting system.

Changes can be made in the Cashflow Settings screen, however you should consider making the changes in your accounting package first and updating Calxa to reflect these changes. Once the appropriate Default Tax codes are set, tax will be applied to each account at the rate set in your accounting package.

Next you must look at the settings in the GST screen in Financial Settings. With the Accrual calculation type set, the tax portion is tracked against your GST/VAT Paid and GST/VAT Collected accounts, and a payment is made according to the chosen Schedule. The payment amount will be equal to the difference in the closing balances of both GST/VAT Paid and GST/VAT Collected at the end of the reporting period.

With the Cash calculation type set, the GST/VAT payment amount is calculated based on the cash movement on each account in the reporting period. Each account’s approximate cash movement is calculated and the tax portion is applied. The sum of the tax amounts equals the payment amount that is paid according to the nominated Schedule.

How is Employee Tax (PAYG/PAYE) calculated and paid?

The sum of all nominated wages accounts will be multiplied by the wages tax withheld % value set in the Wages & PAYG screen to calculate a PAYG Withholding budget.

The PAYG Withholding budget will be automatically added to the PAYG Withholding liability account nominated in the Wages & PAYG screen, and paid on the chosen Schedule.

If multiple wages accounts are used and you would prefer to set separate tax rates for each account, you can exclude them from the accounts nominated in the Wages & PAYG screen and instead manually set the Cashflow Type to Wages tax in the Cashflow Settings screen.

How is Superannuation (Pension Plan/Kiwi Saver) calculated and paid?

The sum of all Superannuation expense accounts nominated in the Superannuation settings screen will be used to calculate a Superannuation Payable budget. This budget is added to the Superannuation Payable account nominated in the Superannuation screen.

Where multiple payable accounts are nominated, they will be treated as a combined account with a combined budget. In cashflow terms, a payment is made according to the chosen payment Schedule.

If multiple Superannuation expense accounts are used, and each account requires separate payment schedules, you will need to set this up manually. To do this, make sure you have only one account nominated in the Superannuation Expense and Superannuation Payable categories, then set up a scheduled payment budget for each of your remaining superannuation accounts.

You will need to manually enter budgets in both the Superannuation Expense and Superannuation Payable accounts, and the budgets must balance. See the Balance Sheet Budget section of the Step by Step Guide to Cashflow Forecasting help note for further explanation.

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