cash book report in quickbooks

Cash Disbursement Journal in QuickBooks: Definition, Creation, and Cash Management

As a business owner or accountant, keeping track of cash disbursements is essential for maintaining accurate financial records. QuickBooks’s Cash Disbursement Journal helps streamline and simplify the recording and managing of cash payments. Let us explore the cash disbursement journal, its importance, and how to use it in QuickBooks effectively.

What is a Cash Disbursement Journal?

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A cash disbursement journal is a financial document managed by an organization's accounting team that comprehensively records all outgoing payments made by the company. These entries are promptly documented before being transferred to the general ledger (general ledger accounts) and utilized to prepare various financial statements. A cash receipts journal is the opposite of a cash disbursement journal. It is where you record payments received by check or cash.

Often referred to as a cash payments journal, this document includes details such as the recipient's particulars, payment method, the sum disbursed, transaction identification, involved accounts, and additional notes. The main objective of maintaining such a journal is to ensure clarity for future reference and to uphold meticulous record-keeping standards. 

Creating a cash disbursement journal can be tailored to suit your needs, allowing for simplicity or complexity depending on your preferences. Including detailed information in each entry enhances your understanding of cash outflows.

Key details to incorporate in your journal entries are:

Keeping your cash disbursement journal current ensures accurate tracking of cash outflows, whether for purchasing inventory, repaying business loans, or other financial transactions.

Maintaining a cash disbursement journal offers pivotal advantages across various aspects of financial management.

Accuracy : The journal guarantees precise financial reporting by systematically recording all cash payments, including those related to accounts payable. This meticulous approach minimizes the likelihood of errors or omissions in financial records, ensuring the reliability of financial information presented to stakeholders.

Transparency : The cash disbursement journal establishes a clear audit trail of all cash outflows. This transparency simplifies the tracking and analysis of expenses, facilitating the identification of discrepancies or irregularities. The journal enhances overall financial transparency within the organization by providing detailed insights into financial transactions.

Internal Controls : As a robust internal control mechanism, the cash disbursement journal enables businesses to monitor cash outflows effectively. Diligently documenting each payment helps detect and deter fraudulent activities, ensuring that expenditures align with authorized budgets and purposes. This proactive approach strengthens internal controls and safeguards against financial mismanagement.

Compliance : Proper maintenance of the cash disbursement journal ensures compliance with accounting standards and tax regulations by accurately documenting all cash-paid expenditures. This detailed record-keeping facilitates regulatory compliance and demonstrates the organization's financial integrity and accountability commitment.

To optimize your use of the cash disbursement journal feature in the popular accounting software QuickBooks, implement the following recommendations:

Open QuickBooks

Launch your QuickBooks software and log in with your credentials.

Navigate to Reports

Navigate to the ‘Business Overview’ menu and click 'Reports.’

Search for Transaction Detail by Account

In the search bar, type "Transaction Detail by Account" and click on the report to open it.

Customize the Report (Optional)

Click on the 'Customize' button on the top right corner of the report screen. Here, you can adjust the filters to get the cash disbursement information.

Set Date Range

On the top, you’ll find a dropdown near the ‘Group icon’ for customizing the 'Report Period.’ This could be ‘today,’ ‘this week,’ ‘this week to date,’ ‘this month,’ ‘this month to date,’ ‘this quarter,’ or a custom date range.

Filter by Account Name

Scroll down to the 'Filter' section, and in the 'Account Name' drop-down menu, select all accounts where outgoing payments can be made. These accounts can include Bank Accounts, Credit Card accounts, etc.

Include Necessary Transaction Types

In the 'Transaction Type' drop-down menu, select 'Bill Payment,' 'Check,' and 'Expense.' It will filter out all the outgoing cash transactions.

Once you have set your filters, click 'Run Report' at the bottom of the customization panel.

Periodic Review

Periodically review and reconcile the cash disbursement journal with your bank statements to ensure accuracy.

The Cash Disbursement Journal documents every instance of cash leaving the business. It captures all transactions that diminish cash reserves, resulting in a credit to cash and reducing overall cash holdings. These transactions encompass outflows, including expenses paid, asset acquisitions, credit payments, and other cash disbursements.

Assets bought

Expenses paid

Payments made to creditors

Loan repayments

The layout of the Cash Disbursement Journal resembles that of the Cash Receipts Journal; in some cases, they are consolidated into a single Cash Book. The Cash Payment Journal includes the following columns:

Date – The date of each cash payment

Details – The name of the other ledger account influenced (for creditors, write the creditor’s name)

Check Number – Supplied by the business (run in orderly sequence)

Bank – The total amount of cash paid that will be assigned to one or more columns on the right

Creditor control – A column on the right reflecting the total amount deducted from the creditor’s account

Stock control – A column on the right reflecting the cost of the stock purchased with cash

Special columns – It would vary based on the nature of each business (Wages Advertising, Drawings, Discounts Received, etc.)

GST – The goods and services taxes paid on transactions

Other columns – For anything that will not fall into particular categories.

Upon the conclusion of a defined period, typically a month, the Cash Payment Journal incorporates a Total Payment row indicating the cumulative amount for each column. Accountants utilize the information within this journal to perform postings in both the General Ledger and subsidiary ledgers.

Managing cash flow is essential for the success of any business. Understanding how different accounting accounts interact with cash disbursement is vital to maintaining financial stability and liquidity.

The credit-control account ensures that receivables are managed efficiently, ultimately impacting the business's cash inflows. By maintaining effective credit control, companies can minimize the risk of bad debts and improve cash flow stability.

The cash account is directly linked to cash disbursement, as it records all outgoing cash payments made by the business. Any decrease in the cash balance reflects the disbursement of funds for various expenses, purchases, or payments to creditors.

The payable ledger tracks accounts payable, representing the amounts owed to suppliers and creditors. As payments are disbursed from the cash account, corresponding entries are recorded in the payable ledger to ensure accurate tracking of financial obligations.

The cash balance reflects the remaining funds available after cash disbursements. Monitoring the cash balance is crucial for maintaining liquidity and ensuring sufficient funds are available to cover upcoming expenses and obligations.

Production costs represent expenses incurred in manufacturing, including raw materials, labor, and overhead costs. Cash disbursements for production costs impact the cash account and are recorded in the cash disbursement journal as part of operating expenses.

Equipment costs involve acquiring and maintaining tangible assets used in business operations. Cash disbursements for equipment purchases or maintenance are recorded in the cash disbursement journal and impact the cash balance.

Journal entries capture the details of cash disbursements, documenting the debits and credits associated with each transaction. Recording accurate journal entries ensures that cash disbursements are appropriately accounted for and reflected in the financial records.

Special journals, such as the cash disbursement journal, streamline the recording process for specific types of transactions. Cash disbursements for different purposes, such as operating expenses, purchases, or loan repayments, may be recorded in specialized columns within the cash disbursement journal for efficient tracking and analysis.

Imagine this! A business, cash flowing in and out like a river. How do they keep it all in check? That's where cash management swoops in to save the day. It's all about keeping tabs on those precious funds, ensuring they're in the right place at the right time. Effective cash management is the pillar of financial stability, from monitoring cash flows to optimizing reserves.

Every penny counts, right? Well, that's where the disbursement amount comes into play. It's the lifeblood of the Cash Disbursement Journal, representing the cold, hard cash leaving the company's coffers. Whether paying suppliers, settling bills, or squaring away expenses, tracking these disbursements keeps the financial ship sailing smoothly.

Card payments have revolutionized how we handle in-store and online transactions. But behind the convenience lies a crucial piece of the business puzzle: accurate recording. Every swipe, tap, or insert must enter the journal, ensuring the ledger reflects every dime spent.

Ever heard the phrase "time is money"? Nowhere is that more evident than in the world of finance. The date payee is the beating heart of the transaction, marking the precise moment when funds change hands. It's not just about marking calendars - it's about keeping financial records accurate and current.

Last but not least, let's talk about the journaling period. Think of it as the timeline of your financial story. Whether it's a month, a quarter, or a year, this structured approach to journaling keeps everything spick and span. It's not just about documenting transactions - it's about painting a clear picture of your cash flow journey.

The cash disbursement journal isn't just a ledger for tracking outgoing payments; it's a valuable tool for understanding your business's financial health. By leveraging its insights, you can ensure accuracy, transparency, and control over your cash flow, empowering you to make informed decisions that drive growth.

However, manually uploading your cash disbursement journal entries can be time-consuming and error-prone, diverting your focus from strategic financial management. This is where Saasant Transactions comes in. With Saasant Transactions , you can import your entire cash disbursement journal sheet into QuickBooks in one go! The power of automation saves you hours of work, allowing you to focus on your business priorities.

What Is a Cash Disbursement Journal in QuickBooks?

The cash disbursement journal, while not a direct feature in QuickBooks, is a customized report that records and tracks all outgoing cash transactions of a business, such as payments for inventory, operational costs, and payroll. This report can be created and customized within QuickBooks to serve the same function as a cash disbursement journal.

How Can I Customize QuickBooks ‘Transaction Detail by Account’ Report?

To customize the 'Transaction Detail by Account' report, click the 'Customize' button on the top right of the report screen. You can set the reporting period, filter by distribution accounts, and include necessary transaction types.

Which transaction types should be included for a cash disbursement journal in QuickBooks?

To effectively create a cash disbursement journal, you should include the 'Bill Payment,' 'Check,' and 'Expense' transaction types. It will cover all outgoing cash transactions.

Why Do I Need a Cash Disbursement Journal in QuickBooks?

A cash disbursement journal is crucial for keeping track of all cash payments going out of your business. Regularly updating and reviewing this report helps maintain accurate financial records, essential for understanding your business's financial health, budgeting, and auditing.

Can the QuickBooks ‘Transaction Detail by Account’ Report Be Used for All Accounts?

Yes, you can select all accounts where outgoing payments can be made. These can include Bank Accounts, Credit Card accounts, and more, depending on the specific financial structure of your business.

How Often Should I Update My Cash Disbursement Journal in QuickBooks?

Updating your cash disbursement journal periodically is recommended. The frequency can depend on the volume of transactions in your business. For example, if your company has numerous daily transactions, you should update the journal daily. For others, a weekly or monthly update might be sufficient.

Will the Steps to Create a Cash Disbursement Journal in QuickBooks Change after Software Updates?

While QuickBooks may release updates or changes, the general steps to generate this report will remain the same. However, it's essential to stay updated with any changes in the software to ensure you're using it effectively.

What is the difference between cash disbursement and payment?

Cash disbursement specifically refers to releasing cash for obligations, while payment encompasses a broader range of settlement methods. Disbursement involves cash release; payment extends to various settlement methods like checks, electronic transfers, or credit cards.

What are cash and cash equivalents?

Cash includes physical currency and demand deposits, while cash equivalents are short-term, highly liquid investments easily convertible to cash within three months. Both are crucial for a company's liquidity, enabling it to meet short-term obligations and maintain financial stability.

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Table of Contents

How to prepare QuickBooks financial statements

1. quickbooks profit and loss statement, 2. quickbooks balance sheet, 3. quickbooks cash flow statement, summary of quickbooks financial statements.

With accounting software options like QuickBooks' small-business products , detailed financial information about your business is always at your fingertips. Financial statements — such as a profit and loss statement, balance sheet or statement of cash flows — are a window into the health of your business and help you spot problems and opportunities.

You can use QuickBooks financial statements when opening a business bank account, applying for a business credit card or loan or when planning for the following year. If you can’t quite figure out how to make something work in QuickBooks, or what reports you should be looking at, read on. We’ll tell you what types of financial statements are available on QuickBooks, what they’ll tell you about your business and the instructions you need to follow to access them.

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The beauty of QuickBooks is that you can create dozens of custom reports to help you better run your business. Beyond the basic three financial statements — profit and loss, balance sheet and cash flow statement — you can also customize reports by product, vendor, employee, bank or customer.

QuickBooks gives you flexibility as to how the statements are used and shared. You can view them in QuickBooks, email them to yourself or another member of the business or export them for later viewing. QuickBooks even lets you schedule financial reporting, so you can automatically receive and share updated financial statements on a periodic basis.

Here are the three main types of QuickBooks financial statements you can create:

Your profit and loss statement, also called an income statement, summarizes your business’s financial performance over a period of time — daily, weekly, monthly, quarterly or annually. It is an important document because it tells you the company’s biggest areas of expenditures and revenues.

The profit and loss statement lets you take advantage of opportunities that increase sales and trim back on expenses. You’ll want to review this statement more than once a year, and definitely before filing your small business taxes. You can run a standard profit and loss statement in QuickBooks or a profit and loss detail which shows year-to-date transactions for each income and expense account.

Here’s how to prepare your QuickBooks profit and loss statement:

From the home dashboard, select Reports on the left navigation bar:

From the Report Center, you can either go to the Recommended tab or to All Reports > Business Overview, then choose Profit and Loss. (The Recommended tab is faster, but you’ll need to go to All Reports to get the Profit and Loss Detail). Just click on the report name or the link that says “Run” to open it.

Once it’s open, you can edit the date range or click Customize to make other changes to the report. For example, this where you can see the amount and percentage of profits coming from a specific product or customer. You can also customize the reporting time period here. If you just change the date directly without clicking the customize button, make sure you click the Run Report button to view the report for the new dates. Keep in mind that you can view the report in QuickBooks, email the report to yourself or someone else or export it as a new file.

A balance sheet is a statement of the assets, liabilities and equity of a business — essentially a snapshot of your business value at a specific point in time. Balance sheet items are calculated by subtracting your liabilities — what you owe — from your assets, cash or property — what you’re own or is owed to you. The result is equity, or what your company is worth.

» MORE: NerdWallet's best accounting software

Balance sheets are useful for accountants to see your financial health and for banks when you are applying for loans. It’s also essential for the small business owner to get a true sense of how their business is doing.

Just as with a profit and loss, the standard balance sheet is fine, but I recommend pulling the balance sheet detail in QuickBooks to send to your tax preparer. As you can guess, this is a more detailed version of the standard balance sheet, showing the starting balances at the beginning of last month, transactions entered in for the month and ending balances.

To create your QuickBooks balance sheet, follow these instructions:

1. In the left navigation bar, click Reports:

2. From the Report Center, you can either go to the Recommended tab or to All Reports > Business Overview, then choose Balance Sheet. Recommended is faster for a standard Balance Sheet, but you’ll need to to All Reports to get the Balance Sheet Detail. Just click on the report name or the link that says “Run” to open it. If you hover over it, you’ll get a preview — this works for the P&L and other reports, too:

A cash flow statement, or statement of cash flows, shows the amount of cash that flows into your business from a variety of sources and flows out of your business in a given period of time. Statement of cash flows is important because it shows your company’s actual cash position to fund operating expenses and debt obligations. The liquidity of your company will be illustrated in a statement of cash flows.

Depending on your accounting method, you might record revenue at the time of a sale or when your customer actually pays. You can specify your accounting method in QuickBooks, making it easy to get a handle on your cash flow.

Here’s how to access your QuickBooks cash flow statement:

In the left navigation bar, click Reports:

Type Statement of Cash Flows in the search field and select it to open the report.

Choose Customize to change any report settings. For instance, you can change the reporting time period or filter by customer, employee, vendor or product. Once you’re finished with customizations, click Run Report.

For most small businesses, the three basic financial statements are all you’ll need to get a good understanding of your business’s financial performance. However, these just scratch the surface of what’s possible with QuickBooks.

Here’s a summary of available QuickBooks financial statements:

Profit and loss statement: View income and expense summaries for your company or detailed numbers for each account.

Balance sheet: Understand your company’s debts, liabilities and assets.

Cash flow statement: Learn how well your business’s cash flow can support its debts and obligations.

General ledger report: Shows you the beginning balance, transactions and totals for each account in your chart of accounts.

Customer, job and sales reports: Keep track of what’s impacting your accounts receivable.

Item reports: Manage your inventory with insightful merchandise and product reports.

Vendor reports: Get a handle on your business expenses and accounts payable.

Banking reports: Reconcile all your bank accounts and credit card statements and analyze where all your money lives.

List reports: These help you quickly pull up lists of information, such as customer lists or product lists.

Payroll and employee reports: Understand how personnel costs are impacting your business (most insightful if you have QuickBooks payroll)

Accountant and tax reports: These reports are only for accountants and tax preparers for use with their clients.

Budgeting and forecasting reports: Use these to plan ahead for your company and ensure that you’re staying within organizational budgets.

Along with periodically running each of these reports, you can also use them for other evaluations, like a common size analysis, as well as get nice visual representations and graphs in QuickBooks of how your company is performing. These are useful for general financial analysis and for planning with your bookkeeper, tax preparer or business consultant.

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QuickBooks Online resources

Read more about how QuickBooks Online works.

How to create a stellar QuickBooks Online budget.

How to import bank transactions into QuickBooks Online.

How to process credit card payments in QuickBooks Online.

How to create a purchase order in QuickBooks Online.

How to write and print checks in QuickBooks Online.

How to adjust prices and price levels in QuickBooks Online.

How to create a QuickBooks income statement.

How to create an invoice in QuickBooks.

How to write off an invoice in QuickBooks.

How to print pay stubs in QuickBooks Online.

Progress invoicing in QuickBooks Online: Step-by-step instructions.

Best POS systems that integrate with QuickBooks.

QuickBooks financial statements: A complete guide.

QuickBooks definitions: The top 22 you need to know.

A version of this article was first published on Fundera, a subsidiary of NerdWallet.

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How to create a cash flow statement in quickbooks.

In today’s fast-paced business world, understanding your company’s cash flow is crucial for making informed financial decisions. A cash flow statement provides a clear picture of how money is moving in and out of your business, helping you assess its liquidity and financial health. In this comprehensive guide, we will explore the importance of a cash flow statement and provide a step-by-step tutorial on how to create one using QuickBooks, a popular accounting software.

Whether you’re a small business owner, a financial professional, or simply looking to gain a deeper understanding of cash flow management, this article will equip you with the knowledge and tools to confidently interpret and create accurate cash flow statements. Let’s dive into the world of cash flow management and learn how to harness its power for better financial decision-making.

What is a Cash Flow Statement?

A cash flow statement is a financial statement that provides an overview of the cash inflows and outflows within a business, offering insights into its financial performance and liquidity.

It serves as a crucial tool for businesses, especially small businesses, as it helps in understanding how money is moving in and out of the company. By detailing the sources and uses of cash, it enables management to make informed decisions about the company’s financial health and stability.

Small businesses can leverage the cash flow statement to monitor their income and expenses, identify potential cash shortages, and plan for future investments or operational needs. This statement is instrumental in financial management, aiding in the assessment of a business’s ability to meet its obligations and pursue growth opportunities.

Why is a Cash Flow Statement Important?

A cash flow statement holds immense importance as it enables businesses to assess their cash flow patterns, conduct cash flow analysis, and fulfill requirements for financial reporting and management accounting.

It plays a crucial role in providing insights into a company’s liquidity and solvency, helping in evaluating its ability to meet financial obligations. It aids in identifying the sources and uses of cash, facilitating better financial planning and decision-making.

The cash flow statement is an essential tool for investors, creditors, and management to gauge the financial health and performance of a business, ultimately contributing to informed strategic actions and sustainable growth.

How to Create a Cash Flow Statement in QuickBooks?

Creating a cash flow statement in QuickBooks involves several steps that allow users to generate a detailed report of their cash inflows and outflows, providing valuable financial insights for effective management.

Users need to access the QuickBooks software and navigate to the ‘Reports’ menu. From there, they can select ‘Standard’ and then ‘Cash Flow’ report to begin the process. Next, they can customize the report by choosing a specific date range or cash basis. Once the selections are made, the report can be generated by clicking ‘Run Report’.

The generated cash flow statement can then be reviewed and exported in different file formats for further analysis and decision-making.

Step 1: Set Up Your Accounts in QuickBooks

To begin creating a cash flow statement in QuickBooks, the first step involves setting up and organizing your accounts within the platform to ensure accurate financial tracking and management.

This process is crucial for businesses to monitor their financial health effectively. By setting up accounts properly, businesses can categorize income, expenses, and assets accurately, providing a clear overview of their financial position. This lays the foundation for precise financial reporting and analysis, aiding in informed decision-making.

It streamlines the tax filing process and ensures compliance with financial regulations, ultimately contributing to the overall financial stability of the organization.

Step 2: Generate a Cash Flow Report

In this step, users need to generate a cash flow report within QuickBooks, utilizing the software’s features to compile a comprehensive overview of their cash flow activities for a specified period.

This process involves navigating to the ‘Reports’ section in QuickBooks and selecting the ‘Cash Flow Statement’ option. Users can then set the desired date range for the report, and QuickBooks will automatically generate a detailed breakdown of their cash inflows, outflows, and balances.

The software provides tutorials and support to guide users through creating and customizing the report to meet their specific business requirements, offering a convenient and efficient way to track and analyze their financial performance.

Step 3: Customize Your Cash Flow Report

The final step involves customizing the cash flow report in QuickBooks, allowing users to categorize revenue and expenses, and tailor the report to their specific financial management needs.

This customization feature provides users with the flexibility to organize their financial data according to their preferences, such as by month, quarter, or year. Users can customize the report to include specific accounts or classes, enabling them to gain a more detailed view of their cash flow.

With these customization options, users can generate highly personalized reports that effectively analyze their business’s financial performance and support informed decision-making.

What Information is Included in a Cash Flow Statement?

A cash flow statement encompasses various essential components, including details of operating activities, investing activities, financing activities, and non-cash transactions, providing a comprehensive view of a company’s cash flow dynamics.

Operating activities represent the core business functions, such as revenue generation and operational expenses, revealing the cash flow from day-to-day operations.

Investing activities include the buying and selling of long-term assets, such as property, plant, and equipment, and investments in other companies, influencing the company’s long-term financial health.

Financing activities involve raising capital, repaying debts, and paying dividends, reflecting the company’s financial structure and liquidity.

Non-cash transactions, like depreciation and stock-based compensation, also play a crucial role in assessing a company’s cash flow.

Operating Activities

Operating activities in a cash flow statement cover the inflows and outflows related to the core revenue-generating functions of a business, reflecting its cash flow performance and facilitating cash flow analysis.

These activities include the cash receipts from sales, payments to suppliers and employees, and other operational expenses. By analyzing these activities, analysts can gain insights into how efficiently a company is managing its working capital, generating revenue, and controlling expenses .

Understanding the cash flow from operating activities is crucial for investors and stakeholders as it provides a clear picture of the company’s financial performance, liquidity, and ability to sustain its operations over time.

Investing Activities

Investing activities within a cash flow statement encompass the cash transactions associated with acquisitions, divestitures, and capital investments, reflecting the financial reporting and cash flow implications of such activities.

These transactions represent significant financial events that provide valuable insights into a company’s investment decisions and capital allocation strategies. By analyzing the cash flows from investing activities, stakeholders can assess the company’s ability to generate future cash flows and its commitment to long-term value creation.

The cash flow statement’s investing section serves as a crucial tool for cash flow management, allowing businesses to evaluate the impact of their investment strategies on the overall liquidity and financial health of the organization.

Financing Activities

Financing activities in a cash flow statement encompass the cash inflows and outflows related to capital structure, debt financing, and equity transactions, influencing revenue, expenses, and financial reporting.

These activities play a pivotal role in shaping a company’s financial health and performance. By scrutinizing the cash flow from financing activities, stakeholders gain insight into how the organization raises and utilizes its funds . This, in turn, impacts the company’s ability to invest in growth opportunities and manage its debt levels. It provides crucial information for investors and analysts in evaluating the firm’s capital structure and assessing its overall financial stability.

Non-cash Transactions

Non-cash transactions in a cash flow statement encompass significant accounting activities that impact financial reporting without directly involving cash movements, reflecting their influence on the overall financial position.

These transactions include non-monetary exchanges, such as the acquisition of assets through stock issuance or the assumption of liabilities, which are vital in portraying a comprehensive picture of an organization’s financial health. By recognizing these non-cash activities, a cash flow statement provides stakeholders with a more accurate understanding of an entity’s operating, investing, and financing activities, facilitating better financial analysis and decision-making. Their inclusion aids in evaluating an organization’s ability to generate future cash flows and meet its financial obligations.

How to Interpret a Cash Flow Statement?

Interpreting a cash flow statement involves analyzing key factors such as positive and negative cash flow, identifying cash flow trends, and comparing current data with previous periods to gauge a business’s financial health and performance.

This analysis offers crucial insights into a company’s ability to generate cash and cover its expenses, debts, and planned investments. By spotting trends, businesses can anticipate potential cash flow issues or surpluses, enabling informed decision-making.

Comparative assessments with previous periods highlight shifts in operating, investing, and financing activities, indicating whether the company’s financial position has strengthened or weakened over time. Ultimately, a thorough understanding of cash flow statement interpretation is vital for effective financial management and strategic planning.

Positive vs Negative Cash Flow

Distinguishing between positive and negative cash flow in a statement is crucial for assessing a business’s financial management and liquidity, providing insights into its ability to meet financial obligations and invest in growth.

Positive cash flow indicates that a company can cover its expenses, reinvest in the business, and pursue opportunities for expansion. It reflects financial health and stability.

Conversely, negative cash flow may signal financial distress, constraints in meeting obligations, and limited capacity for business growth. Understanding these implications enables effective decision-making, strategic planning, and resource allocation to ensure sustained financial sustainability and business development.

Cash Flow Trends

Analyzing cash flow trends within a statement enables businesses to track the trajectory of their cash position, conduct insightful financial analysis, and derive valuable insights for financial reporting and decision-making.

This process involves identifying patterns in the inflow and outflow of cash, which can unveil crucial information about the company’s liquidity, operational efficiency, and investment strategies. By comparing historical trends and projecting future cash movements, businesses can make informed decisions regarding budgeting, investment opportunities, and overall financial health.

Analyzing cash flow trends helps in identifying potential risks and opportunities, thereby allowing proactive measures to be taken to mitigate risks and capitalize on favorable trends.

Comparison to Previous Periods

Comparing current cash flow data with previous periods allows businesses to assess their financial performance, identify patterns, and conduct in-depth analysis to support informed decision-making and strategic planning.

This comparison facilitates a comprehensive understanding of how the company’s cash position has evolved over time, providing insights into the effectiveness of its financial management strategies. By examining trends and variations in cash flow, organizations can detect potential areas of concern, such as declining liquidity or irregular cash inflows/outflows. This process aids in evaluating the impact of operational and investment activities on the overall financial health, guiding the formulation of effective strategies to optimize cash flow and improve performance.

Tips for Creating an Accurate Cash Flow Statement

Creating an accurate cash flow statement requires diligent upkeep of accounts, regular monitoring of cash flow activities, and the utilization of cash flow projections to anticipate and manage financial fluctuations effectively.

Maintaining precise records of all financial transactions is essential for accurately reflecting the cash flow status. Consistent reconciliation of accounts and prompt recording of expenses and revenue sources contribute to the reliability of the statement.

Monitoring cash flow activities allows for the identification of trends and potential issues. Proactive projections based on historical data and current market conditions provide insights for informed decision-making and strategic planning.

Keep Your Accounts Up to Date

Keeping accounts up to date is essential for maintaining the accuracy of a cash flow statement, supporting efficient financial management and ensuring the availability of real-time data for informed decision-making.

Updating accounts regularly allows businesses to have a clear understanding of their current financial position, which is crucial for making strategic decisions. It enables companies to promptly identify any discrepancies and address them, preventing potential financial setbacks.

A well-maintained cash flow statement aids in evaluating a company’s liquidity, solvency, and overall financial health, thereby facilitating effective money management and planning for future growth. Consistent data maintenance is vital in accurately forecasting future cash flows and maintaining investor confidence.

Monitor Your Cash Flow Regularly

Regular monitoring of cash flow activities is imperative for staying abreast of a business’s financial position, enabling proactive decision-making, and ensuring effective financial management practices.

By continuously tracking the inflow and outflow of finances, businesses can identify patterns, anticipate future needs, and make informed decisions to optimize their financial stability. This also allows for early recognition of any potential cash shortages, providing the opportunity to take preventive measures and maintain a healthy cash flow.

A close eye on cash flow helps in planning for investments, managing debts, and seizing profitable opportunities, contributing to the overall success of the business.

Use Cash Flow Projections

Leveraging cash flow projections aids businesses in conducting comprehensive financial forecasting, facilitating strategic management accounting, and preparing for potential financial scenarios with informed proactive measures.

By having a clear understanding of incoming and outgoing funds, companies can anticipate potential cash shortages, plan for investment opportunities, and adjust operational strategies accordingly. Cash flow projections also enable businesses to make informed decisions about budget allocations, debt management, and overall financial stability.

Through this proactive approach, organizations can navigate unexpected market shifts and capitalize on growth opportunities, ensuring sustainable financial health and agility in dynamic economic environments. In essence, cash flow projections serve as a valuable tool in strategic decision-making, enabling businesses to achieve better financial resilience and adaptability.

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QuickBooks Tip: Cash to Accrual Accounting

By Lisa Kahn Little, CPA | April 30, 2014

Understanding cash vs. accrual accounting and what is included under each basis can be difficult for business owners – and even for some accountants! With one of its best features, QuickBooks makes it easier to convert income and expenses from cash to accrual and back again.  Business owners have the ability to run reports on either basis simply by customizing the report.

The two main financial reports are profit and loss and balance sheet.  The profit and loss report reflects the business income and expenses for a specific period of time.  The balance sheet report reflects the information about what you own, what you owe and what you have retained in equity as of a certain date.

Understanding cash vs. accrual accounting

Regardless of what basis you use to run your business or report your taxes, it’s helpful to analyze your company’s performance from different angles.  Income on the accrual basis includes all bills sent to your customers, regardless of whether or not you have received payment.  Income on the cash basis only includes income that your customers have paid to you. Expenses on the accrual basis include everything you owe, regardless of whether or not you have sent a payment.  Expenses on the cash basis include only the expenses that you have already paid.

As a business owner, it is important to track your income and expenses in order to break even.  This is best determined on the accrual basis.  You may have cash in the bank because you haven’t paid any bills, but that doesn’t mean that you have a profit for the month.

In order to get good accrual basis reports, you need to use the accounts receivable and accounts payable modules consistently and effectively.  In accounts receivable, you need to enter invoices and receive payments.  Use accounts payable to enter and pay your bills.

How to change report preferences in QuickBooks

When you originally set up your QuickBooks file, you set your reporting preference to cash or accrual.  You can easily change your reports to the opposite basis by following these steps:

• Select your report.
• Click “modify report” to open the modify report dialog box.
• Select “display” tab and click “cash” or “accrual” in the report basis section.
• Apply the change.

QuickBooks converts accrual to cash reports by removing the unreceived income and the unpaid expenses from the report.  However, there are a few nuances that can cause the cash basis report to be inaccurate.  If one balance sheet account (e.g., inventory) is linked to another balance sheet account (e.g., accounts payable), QuickBooks won’t remove either item, allowing accounts payable inventory to appear on a cash basis report. Additional accounts that won’t be removed include unpaid payroll taxes, credit card liabilities and sales tax payable.

Despite these pitfalls, the overall conversion process works well, and it is one of the best QuickBooks features to help business owners assess performance.

Lisa Kahn Little, CPA, is a Entrepreneurial Services Associate Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.

If you change your setup from Accrual to Cash accounting, under “account and settings” at the beginning of a financial year, will that impact reports and records from all previous financial years? Can you, for instance, toggle between the two methods in the future, for access to reports/for record keeping purposes? In other words, if you reset to cash accounting, can you then run reports accurately by selecting accruals method for each individual report?

Thank you for your question! Changing from cash to accrual or accrual to cash is not going to affect either the current or prior year financials. You can always toggle between cash basis and accrual basis reports. The master setting is for what the reports will default to, so if set to accrual that is how they will first appear and you can always change the setting to cash basis to view those reports. Please keep in mind that QBO isn’t perfect at cash reporting as it doesn’t know what to do with certain transactions. If you need any additional guidance, please fill out a contact form on the website and one of our QB specialists will contact you.

Using QB does a check paying an expense get expensed in the P&L the month in which the check is written/dated or when the check actually clears the bank regardless of whether you are using cash basis or accrual basis/

Great question. The date on the check will determine the date that the expense should be recorded. Regardless of cash or accrual basis, the P&L statement will reflect any transactions recorded based on the date they were expensed. Thank you for your inquiry!

Under cash basis an expense is recognized when paid. Does paid mean the month in which the check is dated and written or the month in which the check actually clears the bank? If check is written/dated in May but doesn’t clear the bank until June is the expense recognized in May or June?

Hello Sam, These are some great questions! In Quickbooks, the expense transactions should match the date on the check. Therefore, if the check is written in May expense should be recognized in May.

Is there a formula or manner in which I can reconcile the differences on the P&L and/or Balance sheet between cash basis and accrual basis. Why would QBO report a higher value for an expense on the cash basis?

Hello John. Thank you for your question!

Unfortunately, there is not a formula to reconcile the differences between cash and accrual basis. In order to be able to reconcile the differences on the Profit and Loss and the Balance Sheet between cash and accrual basis, we recommend reviewing the differences between the cash and accrual basis in terms of the definitions for each.

Under the cash basis of accounting, revenues and expenses are recognized at the time cash is received or paid. Under the accrual basis of accounting, revenues and its matching expenses are recognized when they are generated and not at the time cash is received or paid.

Taking these definitions into account, in order to convert from accrual to cash basis you need to subtract Accrued Liabilities, Accounts Receivable, Accounts Payable from the Profit and Loss and add Prepaid Expenses, Inventory, and Customer Prepayments to the Profit and Loss.

The following article gives an explanation as to why some expenses on cash basis show higher than accrual: Click here

However, Quickbooks allows the option of seeing reports in either cash or accrual basis. Click here

We hope this helps!

Why can’t you run a true cash balance income statement? I’m not sure why credit card payable, accounts payable, etc show up on a cash basis income statement. Is there anyway to run a TRUE cash balance income statement.

Hello Carol! Are you referring to running a balance sheet? If so, you can do this by changing the filter to “cash basis.” Hope this helps you!

I appreciate your article and your responses to people’s questions. Good information and service to the QuickBooks community.

Thank you for the feedback! We’re happy that you found this helpful!

I have been through some Audits and realized in QB, I am not truly on an accrual based system, even though you can easily switch back and forth. For example, it does not pick up unpaid taxes, vacation pay, depreciation etc. Is QB capable of running both Accrual and Cash Basis side by side?

Hello Paul! Thank you for your question. Unfortunately, it doesn’t look like QuickBooks has that feature. If you are using QBD, you can export to excel and combine manually. If on QBO, you can have multiple report tabs open and view one report on cash basis and another tab to view report on accrual. We hope this helps!

I do dog training lessons where it can take many weeks to fully finish the service. I get paid first and render the service over multiple dates. Will this easily track that initial payment as a liability (deferred revenue) and then when one out of six of the training sessions is completed I can change 1/6th of it from deferred revenue to actual revenue, while leaving the remaining balance in a deferred account? Is it all in one section or would I be jumping between pages?

Thank you for your question! QuickBooks would not necessarily do this action automatically for you. The initial liability (deferred revenue) would need to be manually entered and then the earned revenue portion would need to be manually adjusted as the services are provided. These balances would not be on the same page unless you are looking at the trial balance as the deferred revenue liability would be on the balance sheet while the earned revenue would be on the profit & loss.

Does this still just convert to the different basis methods 2021? Or does Quickbooks actually write the journal entry for both on the backend?

Thank you Mike for your question. QuickBooks does not make a visible journal entry (as it is done through the backend of the software) for Accounts Receivable and Accounts Payable when transitioning from Accrual Basis to Cash Basis reports. If your Company has amounts that should be included in accrual based financial reports such as: Accrued expenses, Prepaid expenses, Accrued Salaries, etc., then those entries will need to be entered by you manually. As previously stated in the original Blog, the following will not be removed from Cash Basis reports: unpaid payroll taxes, credit card liabilities and sales tax payable.

I use Quickbooks as a Real Estate managing company. I noticed it does not call tenants, it does not have expiration lease date, it does not have have reminders to renew the lease on the tenant (job) also the list of companies the spear as the last used. It should be listed alphabetically

Thank you for your comment, Dimitrios. We work with many companies in the real estate sector and understand your frustration. Perhaps QuickBooks will release a solution in future updates.

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Using Cash Basis Reports in QuickBooks

We will use this article to discuss using cash basis reports in QuickBooks . One of the very best features in QuickBooks is the fact that it doesn’t force you to use just the Cash or Accrual Basis. This means that QuickBooks will allow you to use accrual basis reports for management information throughout the year and you can also use cash basis reports when preparing taxes. It also doesn’t mean that QuickBooks stores two different sets of books; instead, to help you with keeping a cash basis financial statement, QuickBooks does its best to make the Accrual to Cash Basis conversion. It is important to note that the conversion can sometimes lead to inaccurate numbers that can be somewhat troubling. This is why it is important that you understand how QuickBooks makes their conversions.

In the simplest explanation, QuickBooks makes Accrual to Cash conversions by removing unpaid expenses and unreceived income from your reports. It will also add expenses and income from the previous year that were paid or received in the current year. However, there are a few nuances that can cause the cash basis report to show incorrect information. Here are the most common problem areas:

• Calculation of Cash Basis Reports
• Limits of QuickBooks Cash Basis Reports
• Troubleshooting for Cash Basis Balance Sheets that are Off Balance
• Proofing A/P and A/R within Cash Basis Reports
• Tips and Tricks for Making the Cash Basis Conversion
• How Bills and Partially Paid Invoices affect Cash Basis Reports

Before we dive into each of the common problem areas we will also quickly go over how to make changes to your reporting preferences for cash basis. To change the default setting in QuickBooks, you should:

• Choose Edit menu, then Preferences
• Scroll down and select Reports and Graphs , then choose the Company Preferences option

Understanding the way Cash Basis Reports are Calculated

QuickBooks doesn’t include open invoices using items associated with expense or income accounts from the total income on the cash basis P & L Report. It also adds the total receipts to income against any invoices from previous years.

Similarly, QuickBooks also reduces Accounts Receivable on the Cash Basis Balance Sheet by the total amount of open Invoices that have items associated with expense or income accounts.

This also happens with unpaid bills except in that instance Accounts Payable and expenses are involved. This means that any unpaid bills will be removed from the P&L and Cash Basis Balance Sheets as long as the bill’s coding is to an income or expense account.

Normally, there wouldn’t be a balance in A/P or A/R on a Cash Basis Balance Sheet, but if one does occur it is most likely due to one of the following situations:

*It is important to note that if a Cash Basis Balance Sheet does show a balance in A/P or A/R it may not be enough to determine the cause. You might still have to go in and manually adjust the balance in the A/P or A/R.

• Check the unapplied credit memos and open invoices. Determine if a specific line item points to an account within the balance sheet. A credit memo or invoice that includes an item associated with an account on the balance sheet can affect A/R on both the cash basis balance sheet and accrual.
• Check the unapplied credit memos and open invoices. Determine if they include an Inventory Part. If they do, the “average cost” of the inventory item will remain as a debit within A/R and a credit could offset the balance.
• If your A/R shows a negative balance, it is most likely due to payments that haven’t been applied. An unapplied payment will show as an open transaction and can affect both A/R and other balance sheets – usually Undeposited Funds. You can fix this by creating an Open Invoices report and checking for negative numbers. If you see both negative and positive numbers on the report, you can also use the Receive Payments screen to apply any received payments to open invoices.
• If you can’t find any Invoices to apply payments to, you can also check for bill credits and unpaid bills. If you find that an item is listed that is from a balance sheet account, it will not be removed automatically from the Cash Basis Report. For instance, if a client entered a bill for a credit card or bank loan that is tracked as a liability account by QuickBooks, that bill will debit the liability account and credit A/P. And because the bill is connected to a balance sheet account, the bill affects A/P and the offsetting balance sheet account (such as credit card payable or loan payable) on the Cash Basis Balance Sheet.
• If you find that A/P shows a negative balance, it is most likely because a check coded to Accounts Payable or the overpayment of a vendor using the Pay Bills screen. You can create an Unpaid Bills report to look for any negative numbers. If you don’t see any negative numbers on the report, check the Pay Bills screen and apply any prepayments or overpayments to your unpaid bills. If there are no bills to apply these credits to, refer to the completing the cash basis conversion section.
• You can also look for journal entries that hit A/P or A/R accounts. If Accounts Payable or Accounts Receivable is at the top line of the Journal Entry and the offset is for one or more expense or income accounts, QuickBooks automatically removes it from the journal entry within the Cash Basis Balance Sheet. You can solve this problem quickly by entering any Journal Entries bank account on the journal entry’s top line.

The Limits of QuickBooks Cash Basis Reports

When calculating Cash Basis Balance Sheets there are a few things that QuickBooks can’t do:

• Sales Tax Payable – QuickBooks uses the settings from the screen for Sales Tax Preferences ( Edit, Preferences, Sales Tax, Company Preferences) to determine what amount should be used for Sales Tax Payable on the reports for Sales Tax Liability.
• Prepaids – QuickBooks doesn’t include any balance sheet accounts for customer prepayments, prepaid expenses, retainers, etc. when making calculations for the Cash Basis Balance Sheet.
• Credit Card Liabilities – Any bills entered for Credit Card Liabilities will show on the corresponding Accounts Payable account on the Cash Basis Balance Sheet until that bill is fully paid.
• Unpaid Payroll Taxes – You cannot remove any unpaid payroll taxes from the Cash Basis P&L or Cash Basis Balance Sheet.

Troubleshooting for Off Balance, Balance Sheets

If you find that your Cash Basis Balance Sheet is off balance (meaning the total assets doesn’t equal the total Equity and Liabilities) the problem could be caused due to using customer discounts rather than credit memos. There is a bug that exists in QuickBooks that makes the Cash Basis Balance Sheet appear off balance if discounted transactions are coded to accounts for balance sheets.

For instance, if an invoice was partially paid or paid in full using a discounted transaction and the Debit was coded to a balance sheet (such as Retainers or Customer Prepayments), the Cash Basis Balance Sheet will be off balance.

QuickBooks doesn’t currently provide a simple way to look for discounted transactions, so you will have to use the command for Find and filter it for all Payment transactions. The created find report will include the transactions “Type” column, and you will be able to look for any discounted transactions there. If you find any coded to balance sheet accounts, those transactions will be your problems.

Proofing A/P and A/R on the Cash Basis Balance Sheet

You can use QuickZoom to proof the balances on A/P and A/R on the Cash Basis Balance Sheet by displaying the transactions behind the numbers displayed on the Balance Sheet.

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Cash Flow Forecasting 101 (and Tips for Organizations Using QuickBooks)

By: Jeff Heybruck

Forecasting cash flow is one of the most difficult but impactful planning exercises a business owner can undertake. There are a few prerequisites for creating a cash flow forecast. Before starting, it is helpful for the business to have accurate historical cash flow data, profit and loss statements, and a budget or at least some realistic assumptions to pencil in.

This work will be well worth the effort. An accurate cash flow forecast enables businesses to adjust decisions (eg. when to begin the process of applying for a loan) and operations (eg. anticipate the need for staffing changes) far in advance of expected cash flow shortfalls or potential surpluses. This proactive adjustment greatly increases the business’s chances of hitting planned growth milestones and ensuring sufficient cash reserves.

In this edition of Lucrum’s Small Business Tips, our QuickBooks ProAdvisors walk through the steps and reports needed to get to cash flow forecasting, starting with understanding cash flow.

1. Understanding Cash Flow Statements in QuickBooks

Before a forward-looking view of anticipated inflows and outflows can be achieved, it’s important to look back. The Statement of Cash Flow summarizes the business’s actual cash flow activity over a specific period (eg. a month or a quarter). The format is pretty standard, and it’s considered one of the “big 3” accounting reports along with the Income Statement and Balance Sheet.

The Statement of Cash Flow supposedly gives insight into how much money the business made, where that money came from, and where it went. The problem is, it’s hard for many business owners to understand because it starts with Net Income and reconciles non-cash transactions and timing differences back to the ending cash number. Even Lucrum’s CFO’s struggle to understand it based on the format. But it lives on since it’s an official report as required by Generally Accepted Accounting Principles (GAAP). As you’ll read later, we’ve found that most business owners (and normal humans for that matter) think of cash along the lines of starting balance, money earned, money spent, and ending balance. We like that format a lot better.

A Cash Flow Statement includes three key categories:

• Operating Activities : This section tracks cash directly related to core business operations. Includes inflows like customer payments and outflows like inventory purchases, salaries or rent.
• Investing Activities : This category tracks transactions related to buying or selling long-term assets like equipment, property or investments.
• Financing Activities : This section summarizes cash movement linked to borrowing money, repaying loans, or issuing shares.

Accessing Your Cash Flow Statement in QuickBooks:

• Go to Reports.
• In the Search field, type Statement of Cash Flows.
• Select the Statement of Cash Flows item to open the report.
• Customize the report date range and other settings as needed.

To view a sample cash flow statement, read our article Cash Flow for Small Business .

Tip: While QuickBooks doesn’t require any “setup” per say of the Cash Flow Statement, its accuracy will depend on a well-organized Chart of Accounts and correctly categorized transactions. Read our QuickBooks Setup Dos and Don’ts for more on configuring a well-thought-out Chart of Accounts.

2. Understanding QuickBooks Profit & Loss Statements

The Profit & Loss (P&L) Statement differs from the Statement of Cash Flow in that it tracks profitability, while the Statement of Cash Flow (or any other format) tracks cash movement. It is used to track overall financial performance, while the cash flow statement stops at liquidity management and planning to ensure enough cash for future needs.

QuickBooks Profit & Loss Statements include income, COGS, expenses, taxes and net income (loss). Net Income is the bottom line of the P&L, calculated by subtracting all expenses (including taxes) from total income. It indicates the overall profit or loss for the period.

3. Budgets In QuickBooks

A QuickBooks budget sets specific targets and goals for future income and expenses. In essence, it is a roadmap for the desired cash flow performance. Folding budgets into Cash Flow Projections allows for scenario modeling and planning (eg. unexpected expenses, increased sales). Marrying a budget with a cash flow report turns a historical document (showing what already happened) to a forward thinking one (a forecast).

Read our Budgeting in QuickBooks 101 small business tips for detailed information on how to create a budget in QuickBooks.

4. Assumptions

Historical data can help us to make some assumptions about key metrics for cash flow forecasting. For example:

• Average Days to Pay is used to estimate how long the business expects it to take their customers to pay invoices. This impacts the cash inflow from sales.
• Payment Term, the payment terms negotiated with suppliers and customers. This also influences the timing of cash outflows.
• For non-services businesses, Inventory Turnover can be another assumption needed. The number of times inventory is sold and replaced within a specific period can influence tied-up cash.
• For businesses who get deposits, understanding the timing and seasonality of deposits can also make a big impact on cash flow but not affect the Income Statement.

Assumptions will collectively shape the Cash Flow Forecast.

5. Cash Flow Forecast

Depending on the version of QuickBooks used, there may be built-in tools available (eg. QuickBooks Online Cash Flow Planner can predict cash flow over the next 30 to 90 days) to forecast cash flow.

But even if you don’t have a subscription to QuickBooks that includes such a tool, projections can still be calculated in Excel. This is typically structured as a 13-week rolling cash flow forecast or a twelve-month report showing the current year Actual and Forecasted results. In fact, our accountants recommend exporting data to Excel for the cash flow forecast for its flexibility to fit the specific cash flow method.

For example, some companies might want to track all cash flow in one bucket, while others may want to break this out by customer or supplier. The business model and type could also determine whether a shorter or longer term cash flow forecast (other than the 13-week rolling) might be needed.

Instead of using the GAAP approved Statement of Cash Flow, Lucrum has created our own cash flow reporting format that we call a Sources and Uses report. We like it more because it follows with how most of our business owner clients think of their cash: “what did I start with, what did I do this month, and where did I end up?” Our report breaks down all activity into three buckets:

• Financing Activities : This section summarizes cash movement linked to borrowing money (loan draws, line of credit, credit card activity).
• Owner Activities : This section looks at cash transactions related to owner and shareholder activity. It includes investments by the owner or withdrawals from the business. It also includes owner salaries. It provides insight into how owner-related transactions may be affecting the company’s cash flow.

Combining all the above financial data allows businesses to arrive at Cash Flow Forecasting. Here’s how each contributes:

Cash Flow Report : Whether the official accounting industry Statement of Cash Flow, Lucrum’s own Sources & Uses report, or one of your own creation, use historical data from your cash flow statement as a starting point for estimating future receipts and payments.

P&L Statement : While not directly showing cash flow, the P&L provides valuable insights for your forecast. Look at revenue lines to estimate future cash inflows. However, remember that some expenses like depreciation don’t affect cash flow, so adjustments are needed.

Budget : Your budget acts as a roadmap for planned expenses and income. Forecast cash inflows based on budgeted sales and collections, and cash outflows based on planned operational costs, investments, and debt repayments.

Assumptions : These are crucial data points that will be directly used in your forecast. Use realistic assumptions about factors like future sales growth, collection periods, payment terms, and planned investments. Consider various scenarios with different assumptions to test the sensitivity of your forecast.

In Conclusion

Remember, your cash flow forecast should be flexible and adaptable. Regularly review it as circumstances change. Data consistency is also key. Ensure data from all sources (budgets, statements, historical records) is aligned and comparable.

Need help getting to cash flow forecasting? Our QuickBooks experts can help. Learn more and reach out to our QuickBooks ProAdvisors here .

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Understanding the Cash Flow Forecast Report with QuickBooks®

Keeping your business on track and setting it up for growth requires establishing processes that work to improve your cash flow. Tracking and monitoring your cash flow gives you insight on how well your business is doing and what areas need your attention. However, how do you look beyond your current cash flow to plan ahead by months or even years?

With a cash flow forecast - you will improve cash flow management - helping you to anticipate cash inflow and outflow and the amount of cash on hand in your company at any time in the future based on anticipated income, accounts receivable, accounts payable, current cash in the bank and anticipated expenses.

So where do you start and how can you create a report to show you the future?

See the Future! Cash Flow Forecasting Drives Business Success

A cash flow forecast, sometimes referred to as a cash flow projection is usually a simple spreadsheet. But it’s not an ordinary spreadsheet: a cash flow forecast spreadsheet helps you predict your company's future cash flow position.

Intuit QuickBooks ® has cash flow forecasting features. "Pulse is a cash flow forecasting application that allows integration with QuickBooks. PlanGuru is another software option that lets you report in Excel, QuickBooks, or other file formats. Any of these options let you see how your cash balance is doing. By having this information, you can make smarter decisions, spend your time more wisely, and have your company perform better."

Create Your Cash Flow Forecast Report

There are two easy steps to creating the Cash Flow Forecast Report once you launch QuickBooks.

• Choose the “Reports” tab and scroll down to select the “Company & Financial” option.
• Select the option “Cash Flow Forecast”

Inuit QuickBooks ® also recently created an app called Cash Flow Frog -  Simple cash flow forecasting for your business within seconds

Cash Flow Frog integrates seamlessly with your QuickBooks account. It automatically analyzes your data and generates a cash flow forecast. The data is updated on a daily basis so it is always up-to-date.

Analyze and Understand your Report

What does the cash flow forecasting report tell you? What do you need to understand in order to accurately forecast your cash flow?

The report takes a look at your cash inflows (accounts receivables) , your cash outflows (accounts payables) , and your bank account balances week by week. The report is divided into four columns. By clicking on each column, you can see what transactions were calculated to make up the amount. This report can help you see the relationship between cash flow and profits .

Balance Amounts Columns

• Accounts Receivable: this column reflects the customer payments you are expected to receive. This amount is calculated based on the payment terms you recorded in QuickBooks per customer. This amount will help you project how much money is coming into the business (cash inflows) .
• Accounts Payable:   this column shows the bills you are expected to pay, and is calculated based on the payment terms you set for each vendor in QuickBooks. This amount allows you to estimate how much cash will be used for accounts payables (cash outflows).
• Bank Accounts: QuickBooks is a powerful platform in that it just does not look at the flow of cash in and out of the company. It also calculates the expected changes to the company’s bank account balances. This number is factored based on payments and deposits that were post dated after the report start date.
• Net Inflows: this column is a projection of net cash inflow for each week. The net inflow is calculated based on the amounts in the Accounts Receivable, Accounts Payable, and the Bank Accounts columns.

Changing the Defaults

The cash flow forecast is based and calculated on the assumption that all customers will pay their invoices on time.

To ensure that you are prepared for the inevitable fact that that some customers won’t pay on time, adjust this forecast to see how it would be affected by late payments. This is valuable information since it will help you with your budget planning and strategy for the year ahead.

To make this change, enter the number of days of delayed payment in the field labeled “Delay Receipts.”

QuickBooks automatically sets the cash flow forecast report on a week to week basis by default. This can be changed to other desired intervals such as days or months. This helps with forecasting cash flow on a monthly basis and is great to set up an annual budget as well. To change the default periods, click on the “Periods” drop-down list and select the interval of your choice.

There is a lot to understand when it comes to managing your cash flow and analyzing your projections. You also have to keep in mind that QuickBooks can only use information that you have provided and entered. It is no doubt a powerful tool so you can see what the future holds for your business and what decisions you can make based on it. However, you have ensure that you are keeping a close watch on the cash moving in and out of your business as this can severely impact the outcome.

Most CEOs and small business owners understand the value of creating budgets, however, it can be painful if you don’t have the resources in place to work through the process.

At GrowthForce, we can help manage your processes by providing expert bookkeeping, accounting and controller services so you can focus on what matters the most to you - growing your business.

Cash Flow Forecasting:  Keep your finger on the financial pulse of your business with our cash flow tools & analysis.

We provide the budgeting services and cash flow tools and analysis you need to keep your finger on the financial pulse.

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