When calculating the Cashflow and Balance Sheet Forecast reports, Calxa uses your P&L and Balance Sheet budgets and the account and timing selections you make in the Financial and Cashflow Settings screens.
Accounting rules dictate that debits must equal credits, and the same can be said for your budget. Calxa will keep your debits and credits balanced for you in most cases, however there will be certain circumstances when this is not possible.
With more complex budget scenarios it is possible that the budget will go out of balance. Specifically, this can occur when using a cashflow type of None or Schedule. For more information on these settings refer to the Financial Settings section of the Step by Step Guide to Cashflow Forecasting.
The Budget Discrepancy Analysis report can be used to check for budget balancing discrepancies and to isolate problem accounts budgets.
Running the Budget Discrepancy Analysis Report
- Navigate to the report builder screen clicking on Reports -> Builder.
- Type Budget Discrepancy into the search bar, then click on the Budget Discrepancy Analysis report tile to open the report in the builder.
- Note: There is another template variant that can be selected from the drop-down next to the template name called By Debits/Credits, which groups the report by debits and credits rather than cashflow type.
- Set the report month at top right, then select the Organisation, Budget Version, and the start date of the report in the report criteria section on the left.
For more instructions on how to set criteria, refer to the Set Report Criteria help note.
- Click the Refresh button when you have set your report criteria to display the report.
Interpreting the Report
We will use the example below to discuss the properties of the Budget Discrepancy Analysis report. The Before example shows two obvious discrepancies which have been resolved in the After example.
As mentioned earlier, discrepancies can occur when budgeting on accounts with a cashflow type of None or Schedule. This is not the case for all accounts with these cashflow types and is why the discrepancy report isolates only the accounts of interest, in particular the accounts with a cashflow type of None or Schedule where they are not a calculated account.
In the following example you can see there is a discrepancy on the bottom line. If a budget is balanced this value should be zero. This value is calculated by summing all of the debit values and subtracting all of the credit values.
Accounts are grouped by cashflow type and then by account type. Grouping them by cashflow type allows you to first check that the correct cashflow type is assigned and clearly outlines why this account requires special consideration. It is for this reason that the accounts are not grouped by debits and credits. If discrepancies exist your first check should be that the correct cashflow types are assigned.
Once you are sure the cashflow types are correct, try to group the accounts into pairs or smaller groups that should individually have a balance of zero. In the example above let’s look at grants, depreciation and accrued expense as our smaller groups.
The reason our grant cashflow type is set to None is because we have received the grant money in advance. The income budget is used to journalise the monthly income.
There is therefore no cashflow effect from this budget, however in this example there is no budget to reflect the allocation of this monthly income on the Balance Sheet side. We will need to add a budget to allocate the income from the associated Grants Allocated liability account. The income account budget has already been entered, and is shown in the Before example.
In the depreciation expense we can see that there are matching accumulated depreciation budgets that balance, so there is no issue with depreciation.
When depreciation is out of balance there are a couple of common reasons. Firstly, the accumulated depreciation account budgets should be entered as negative amounts as they are contra asset accounts. Secondly, both the depreciation expense and accumulated depreciation expense budgets must be balanced.
The accrued expense account has been set to a cashflow type of Schedule. Is this correct? If it is correct we next need to ask which expense it relates to. There is no expense account to match this item within this report. This is either because the matching account does not have a budget, or the incorrect cashflow type is assigned.
Accounts with a Schedule cashflow type require a matching account with a cashflow type of None. If we think of an example where the accrued expense will be accrued and paid quarterly, then the payment each quarter will be balanced by the bank movement. The monthly accrual, however, needs a matching expense budget with a cashflow type of None.
Note: There is another template variant available for Budget Discrepancy Analysis that can be selected from the drop-down next to the template name called By Debits/Credits, which groups the report by debits and credits rather than cashflow type.