Our next addition to the financial statements family is the Statement of Cashflows. This report identifies actual cashflow on the main bank accounts and breaks this analysis down to operating, investing and financing activities. Using the indirect method means the operating activities are calculated by starting with Net Profit and adjusting for non-cash activities and then adjusting for balance sheet changes such as Debtors and Creditors. This report however cannot just be run out of the box as it does require some configuration before it can run efficiently. In this article, we would like to highlight the best approach to generating a Statement of Cashflows in Calxa and point out the available support material.
Step 1 – Categorise Accounts
Since the report categorises cashflows as Operating, Investing or Financing, Calxa requires that all accounts are categorised under one of these categories and a new screen has been developed for this purpose. The first step is to open the Statement of Cashflows screen under financial settings and categorise all accounts as appropriate.
Step 2 – Ensure Non-Cash Accounts are Balanced
One of the categories in the financial settings is Non-Cash. Since the statement of cashflows identifies cashflows Non-Cash accounts will be adjusted out of the report, however, if the sum of the Non-Cash accounts do not balance to zero (equal debits and credits) then the net cashflows will not balance with the opening and closing bank. To ensure a balanced report, we must first ensure all nominated Non-Cash accounts balance. Generally, this is simply a case of ensuring each account has a matching pair. For example, depreciation expense should have a matching accumulated depreciation account nominated.
Step 3 – Create Account Tree for Summarising
Traditionally the statement of cashflows report is a summary level report that does not necessarily rely upon the naming or groupings from your chart of accounts. In this report however, Calxa will be using your account numbers and names for grouping and ordering. The Account Level in the report criteria can be used to show or hide detail however you may also wish to create an Account Tree with custom groupings such as Depreciation Expense, Payments on long-term loans or any other categories that may help to summarise and make the report more readable.
Step 4 – Run the Report
Now that the prep work is done you should be able to confidently run the Statement of Cashflows report time and time again. Be sure to check the discrepancy row to ensure the report is accurate.
For a detailed look at each of these steps check out the help note article – Prepare a Statement of Cashflows.
You can find more information on how Calxa can help you with your business cash flow on our Cash Flow Forecasting solutions page.