Cash flow budget

Here you will learn how to configure the application to generate cash flow budget of the enterprise.

With the subsystem tools, you can get flexible solutions depending on the industry you work in and your company's management methods. You can export the budgeting model and its basic catalogs (budgeting scenarios, budget profiles, budgeting steps, and so on) to a file and import them to another infobase. Along with the standard configuration, you get a file with a budgeting model example. Below you can find recommendations on how to set up the application based on the economic theory and best practices.

An underlying approach to planning is to develop a multi-factor and interrelated model of financial plans. This principle allows you to carry out the factor analysis of received values and make changes to financial plan values with minimal labor costs. In other words, one or several system sources must be used to calculate each new amount. If you cannot use system data as it does not exist or is not reliable, you can enter required data manually.

Before you continue with the setup, we recommend that you configure:

• Basic settings of financial planning
• Income and expense budget
• Capital investment budget
• Equity change budget
• Master plans

Amounts of incoming and outgoing payments from operating and investment activities are usually VAT inclusive. In this guide, VAT amounts will be calculated automatically as we assume that all transactions are VAT inclusive.

Make sure you register indicators of financial plan amounts and quantity with a positive sign. For negative data, you need to set up the display and calculation formulas separately for each budget type.

Step 1. Generate a structure of budget flow items. You can use budget flow items to create a structure of the cash flow budget.

Step 2. Generate a list and a structure of budget data related to the cash flow budget. Note that a data structure must be created based on the enterprise policy of financial planning and budgeting.

The economic theory outlines the following financial plan (budget) categories:

• Operating financial plans. The system source of operating budgets is the inventory planning subsystem. It allows you to calculate financial plans of customer payments and payments to vendors. You can register operating financial plans with inventory planning documents, so you do not need to create a separate budget profile for them.
• Auxiliary financial plans. These plans provide forms where you can enter and register planned data manually. We recommend you to collect information on cash flows that are not related to the main operating activity of the enterprise. For example, payments for commercial or administrative services.
• Master budget. These plans provide a report form for the data registered in the application with documents of auxiliary and operating financial plans. You can also use these reports to carry out the variance analysis or build forecast models.

We recommend you to register cash flows related to the investment activity within the investment budget. This will ensure a high level of accuracy for planned data when non-standard payment terms are applied. Besides, you will be able to take into account payment terms for additional services related to acquiring investment objects.

For budgets, select a planning method: fixed boundaries of the planning horizon or rolling boundaries of the planning horizon, where the horizon amount remains the same when the planning period is moved forward. With the rolling planning, you need to check and update the financial plan for new periods regularly. Keep in mind that you need to select a planning method based on the enterprise policy of financial planning and budgeting.

Step 3. Set up rules to request information from system sources.

Once you set up the application, the financial planning subsystem is ready for use as a tool for financial planning of the cash flow budget.