Host-Analytics_167x167Growing a business is of the utmost importance, however, how does a company know what funds are available to grow the business? One of the answers is by looking at the Cash Flow statement. It is vital to know where your company stands in regards to available cash, however, it is also crucial that you know how to analyze where the cash is coming from/going to so that you can Budget for future activities. Budgeting for the Cash Flow is extremely important for the following reasons:

1) It demonstrates whether too much cash is being left in unproductive areas and should be used elsewhere to improve on gains.
2) It defines how and when merchants will be paid
3) It allows a company to decide how much credit it can extend to customers before jeopardizing its cash assets
4) It may give insight into how a lender will respond to a loan request should your company be in the market to take on more debt (both short-term and/or long-term)
5) It impacts the behavior of the increases/decreases to owner’s equity, the payout of dividends, and the overall lucrativeness of the company

As you can see, Budgeting for the Cash Flow can give the company some great insight into how dollars should be spent and potentially what management decisions should be made in the future. To come up with the Cash Flow Budget it is important to look at Historical Actuals, as well as trends. It is also important to meet with the key players at the company to understand what additional expenditures and overall objectives each has for the upcoming year. All of these aspects combined with internal workforce planning, knowledge of the overall economy, and a confident outlook regarding unanticipated costs, will help in creating an accurate and well-rounded Cash Flow Budget.

Now that we have laid out why it is important to Budget for Cash Flow and some important things to think about when doing so, let’s cover some tips and tricks on how to build a Cash Flow model using Host Analytics:

  • Build out a Cash Flow Budget template within Host Analytics
    • Reference Cube in the Balance Sheet data to do your calculations
    • This template will mostly be made up of reference and calculated lines, however, it is a good idea to also build adjustment lines into the template for additional inputs that might have to be made
  • Create Statistical Accounts to house the Cash Flow Budget data
    • This will help make building reports easier
    • You can also post Actual data to these accounts
  • If you have the consolidation module, utilize this to build out an Actual Cash Flow template. You can then post the data in this template to the statistical accounts that were created. You will then be able to build a report to compare Actual Cash Flow vs. Budgeted Cash Flow
  • If you do not have the consolidation module, build out the logic within a report to generate your Cash Flow numbers. You can calculate the monthly change by doing the math within an advanced MDX rule.
  • Another alternative is to create calculated members within the account dimension and to pull these members into reporting.
  • Finally, create the necessary reports to show where improvements should be made in the future or if your Budget is on track.
    • You can create static report sets with formatting or pull the statistical accounts onto the row of a dynamic report.

All of these tips and tricks should prove helpful when building out your model within Host Analytics. In the end, you will be able to run comparative reports and really see the cash ins and outs of the company. Having this visibility will help with the rest of your overall planning process and also dictate what changes need to be made to help grow a successful, viable business. If you have any further questions regarding Cash Flow Budgeting in Host Analytics, please feel free to email me at [email protected]

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Kim Albelo