If you're using the Calxa Online browser app, refer to this article instead.


Step 1: The Profit & Loss Budget


  • Create a budget for the current financial year and next year
  • For technical details on editing your budget, see this help note.  If you don’t have a budget yet, use the Budget Factory to get started.
  • Review  your business plan (whether that is a fancy document or something that’s in your head) and adjust the budget accordingly:
    • Will your income increase or decrease next year? Is this because of something you are planning or external factors?
    • If your income changes what effect will that have on Cost of Goods sold, on Wages and other expenses?
    • Think about other changes that might affect your budget


Step 2: The Balance Sheet Budget


There are many transactions in the Balance Sheet accounts that will affect your cashflow projection. Some of them, such as your Trade Debtors, Trade Creditors and tax accounts are calculated by Calxa. For others, you need to provide some input:

  • If you have multiple bank accounts consider combining them in the Default Accounts section
  • If you have a Cash Management or similar account enter a positive budget when you transfer money into it, a negative amount when you transfer money out
  • Add positive budgets for the purchase of new assets, negative amounts for their disposal
  • Consider how you use credit cards:
    • If the balance is stable each month, you don’t need to budget anything
    • If you are gradually repaying the card enter a negative budget each month for the net amount you plan to repay
  • Use the Loan Wizard to enter new loans. This adds in budgets for the receipt of the new loan, monthly repayments of principal and interest
  • Not-for-Profits receiving Grants in Advance should review the support note for the correct setup


Step 3: Timing


Timing is the difference between a budget and a cashflow forecast. A budget looks at when the accounting transactions will take place but payments and receipts are often offset from these.

 

Calxa Express users don’t need to be concerned by most of this section (except Taxes below) as the software provided sensible default settings for you.

Receipts

  • The default setting for most income accounts is Debtor Days. This uses your average days outstanding debtors (from your accounting data) to create a profile of receipts, estimating what proportion will be received each month. For most businesses this is likely to give the best result
  • Premier users can change the setting to Profile in Cashflow Settings and then enter your own estimate of timings
  • Not-for-Profits receiving Grants in Advance should review the support note for the correct setup. This process will apply to any organisation where income is received to a liability account and then journalled to the income account each month

Payments

  • The default setting for most Cost of Sales and Expense accounts is Creditor Days. This uses your average days outstanding creditors (from your accounting data) to create a profile of receipts, estimating what proportion will be paid each month. For most businesses this is likely to give the best result
  • Premier users can change the setting to Profile in Cashflow Settings and then enter your own estimate of timings
  • Wages and Salary accounts have a cashflow type of WagesTax which can be set either in the Default Accounts screen or in Cashflow Settings. This is used to split the budgeted amount between the net pay that is paid out each month and the tax that is withheld and paid to the tax office at a later date.
  • Taxes and other liabilities such as Superannuation payments are managed with Schedules that determine the frequency of payments. Premier users can create customised schedules if the defaults are not suitable. Schedules can be set in the Default Accounts screen.


Step 4: Presentation


Always consider your audience when deciding how best to present your cashflow forecast.  Charts are often best for board reports and senior management. 


They are visual and easy to interpret at a glance.

presentation_a



For those who need reports, consider the level of detail that is required. An accountant may be interested in a Level 4 report with all the detail but other users may be satisfied with Level 2 or 3 (which will depend on the headings in your Chart of Accounts). If these headings aren’t the most useful, consider using Account Trees to re-group the accounts into something more meaningful for your readers.

presentation_b



Step 5: Review, Revise, Improve


Expertise in cashflow projections comes with time and practice. The more you do them the better you will become. The more familiar you are with the projections for your organisation the more likely you are to recognise anything odd and unusual.


Review

  • Use the Discrepancy Analysis Report to check that your budget balances
  • Test your cashflow forecast for reasonableness. Does it meet your expectations?

Revise

  • Using Budget Versions you can modify your budget as the year goes on and the world around you changes. You can model different scenarios and examine the cashflow effect before committing to major new decisions

Improve

  • Customise your reports by adding a logo to improve your presentation