A simple explanation of Profit & Loss movement

A cashflow forecast isn’t complete without considering what’s happening in your Balance Sheet accounts. It’s fairly straightforward to master the skills needed to put together a Profit & Loss budget, but movements in assets and liabilities are less familiar to many people. In this article, we’ll explain the principles involved in using balance sheet budgets, rather than all the technical details.

There are 2 key elements to keep in mind when creating balance sheet budgets:

  1. Budget for the movement or change in the account, not the expected ending balance.
  2. Positive amounts indicate an increase, regardless of the account type. For example, when you add a new loan the initial receipt is positive (it increases the liability) but the repayments are negative (you now owe less).

The easy bits of Balance Sheet Budgets

When you budget with a spreadsheet, some of the hardest accounts to calculate are your bank, payables and receivables and GST/VAT. Each has its own complexities, being calculated from the movements of many other accounts and it’s easy to end up going around in circles. So, the first good news we have for you is that Calxa calculates those accounts for you. Any of the accounts nominated in the Default Accounts/Financial Settings area are worked out for you and you don’t need to set a budget for them.

New Assets

Buying a new car or some equipment for the business? Simply add a positive movement to the relevant account in the month you’re buying it. Just remember that all budgets exclude GST or VAT.

Other Bank Accounts

If you’re using a cash management or investment account for surplus funds (or to stash some away for your tax bills), use a positive amount when you add something to that account, a negative amount when you move it back to your main account.


Credit Cards

Credit cards can appear complex but they’re really simple. If you’re rotating funds through them and the balance doesn’t change much, don’t budget for anything – it’s the movement we care about. On the other hand, if you have plans to reduce the balance over time, put in a negative amount for the monthly reduction.

The more complex tasks in Balance Sheet budgets

Other parts of the balance sheet are a bit harded to budget for.


Loans can be complex if you enter them manually but even then, it’s a matter of budgeting a positive amount for the receipt of the loan (because your liability increases) and then negative amounts for the principal repayments. The alternative though, is to use Calxa’s Loan Wizard to work out all the numbers for you and put them in where they belong.

Income in Advance

Some of you will receive your income in advance in lump sums and then allocate it to each month with a journal. We have a Help Note that will take you through this step by step so you get the right numbers in your monthly reports and on your cashflow forecast.

In Short

Don’t be intimidated by Balance Sheet budgets. They’re mostly fairly simple but they can have a big effect on your cashflow forecast so you shouldn’t ignore them. Check out this webinar recording on Understanding Budgets for the Balance Sheet.