Clockwork's Cash Flow Forecast learns from the income and expense forecast in your Financial Model, historical balance sheet movements, and a granular analysis of invoice and bill payment timing and behavior.
Using this information, along with your own custom assumptions, the Cash Flow model calculates a weekly cash flow projection with a detailed breakdown of the activities that will generate and burn cash in the future, and the resulting bank balance projection.
*Note: click the "v" drop down to expand each category.
You can select your time frame and period frequency from the "Model Settings" in the Settings for your company.
Understanding the Cash Flow Model
First, we'll explain each line in the model. Then we'll show you how to customize the forecast even more!
The "Cash in" line sums all of the activities within your business that resulted in cash inflows (i.e. cash coming into the business). Clicking on the "Cash in" row expands the child rows, which provide more detail on the sources of cash coming into your business:
Cash Revenue: This line represents the revenue that comes directly into your business as cash (or in other words, the revenue that is not invoiced for future collection).
Invoices Collected: If a portion of your sales are invoiced, that money doesn't come in immediately as "cash revenue," but rather it's collected at a later date when the invoice is actually paid by the customer. When that money is eventually collected (i.e. when customers pay invoices) the cash coming into your business is tracked on the "Invoices collected" line.
Other Cash In: This row sums the balance sheet activity that brings cash into your business. If you click to expand the "Other cash in" row you'll see 3 rows appear: Assets, Liabilities, and Equity. Examples of balance sheet activities that might bring cash into your business are selling an asset, receiving a new loan, or raising a round of equity financing.
Please note: there are similar Asset/Liability/Equity rows in the "Other cash out" section lower down in the model, which track the cash outflows associated with your balance sheet activity. It is possible to see activity in both sections within the same period (for example, if you sell and purchase an asset in the same week, there would be entries in the Assets line in both "Other cash in" and "Other cash out"
The "Cash out" line sums all of the activities within your business that resulted in cash outflows, or cash leaving the business. The total is broken down into 3 categories:
Cash Expenses: This line represents the expenses in your business that are paid when they are incurred (or in other words, the expenses that are not billed for future payment).
Bills Paid: If a portion of your expenses are handled via bills (to be paid at a later date), that money doesn't immediately exit the business as a "cash expense," but rather the cash exits when the bill is actually paid. When a bill is paid, the cash exiting your business is tracked on the "Bills paid" line.
Other Cash Out: This row sums the balance sheet activity that result in cash outflows from your business. If you click to expand the "Other cash out" row you'll see 3 rows appear: Assets, Liabilities, and Equity. Examples of balance sheet activities that might cause cash to exit your business are purchasing an asset, paying back a loan, or repurchasing shares in your business.
Net Cash Flow
Net Cash Flow is the sum of all cash coming in and going out of your business each week, as a result of all the various activities in your business. This is sometimes referred to as "cash burn rate" (if it's negative) or simply "cash flow."
This is your ending cash balance each week, based on the cash coming in and out of your business.
Understanding and Customizing Your Cash Flow Forecast
Cash Revenue + Cash Expense
Your "Cash revenue" and "Cash expense" forecasts are driven by the revenue and expense forecasts in your Financial Model, along with historical patterns we identify in your business using our AI model, which predicts how much of your forecasted revenues/expenses will be collected/paid up-front vs. how much is collected/paid at a later date. To adjust this portion of the cash flow forecast, you can go into your Financial Model and edit the forecast assumptions on specific revenue and expense accounts. Check out this article to learn more about customizing the Financial Model: Financial Model
If some of your forecasted revenues are not immediately collected as "Cash revenue," in most cases that money is still going to be collected at a later date. Clockwork learns the typical payment behavior of your customers to project the timing of these future collections in the "Invoices collected" row. For example, if you forecast $100 of revenue in January, and you typically get paid 30 days after a sale, you'll most likely see that $100 show up as Invoices Collected sometime in February.
Clockwork also looks at your real outstanding invoices (i.e. upcoming and overdue invoices sitting in your accounting system) to predict if/when those specific amounts will be collected. To review and adjust this portion of your cash flow forecast, simply click the "Invoices" button in the top-left of the Cash Flow Model.
Next, you can click directly into the Amount Due or Expected Payment Date for each of the invoices to edit their values - make sure to save your changes!
You can adjust the way you are looking at invoices by clicking the 'Sorted by' drop down in the top right. There you can filter by the Amount due, Customer, or by Due date. When bulk editing your Invoices, you'll want to select the customer/group of invoices you desire, and change the payment date or clear the expected pay date in the top right.
Similarly, if some of your forecasted expenses are not immediately paid as "Cash expenses," in most cases you'll still pay those bills at a later date. Clockwork learns your typical bill payment behavior to project the timing of these future payments in the "Bills paid" row.
Clockwork also looks at your outstanding bills (i.e. upcoming and overdue bills sitting in your accounting system) to predict if/when those specific amounts will be paid. To review and adjust this portion of your cash flow forecast, simply click the "Bills" button in the top-left of the Cash Flow Model. Next, you can click directly into the Amount Due or Expected Payment Date for each of the bills to edit their values - make sure to save your changes! You can also sort your bills by Amount due, Vendor, and Due date.
You can also adjust the way you are looking at invoices by clicking the 'Sorted by' drop down in the top right. There you can filter by the due date, the amount due, or by customer. When bulk editing your bills, you'll want to select the customer/group of invoices you desire, and change the payment date or clear the expected pay date in the top right.
Other Cash In + Other Cash Out
If there is any balance sheet activity you'd like to capture in your cash flow forecast (e.g. an upcoming loan, investment, equity distribution, etc.) you can expand the "Other cash in" or "Other cash out" rows to enter those events directly into the model.
When hovering your cursor over any of the forecast cells for Assets, Liabilities, or Equity, you'll see a pencil icon appear. Simply double-click on the cell you'd like to edit, type the value you'd like to capture, and hit 'enter' (or click outside of the cell) to save your input.
Please note: forecast cells in the "Other cash in" section only accept positive values (representing cash inflows), and forecast cells in the "Other cash out" section only accept negative values (representing cash outflows). As an example, if you plan to take a $100 loan and purchase an asset for $75, you'd enter 100 in the "Liabilities" row under "Other cash in" (to represent the $100 cash inflow from the loan) and -75 in the "Asset" row under "Other cash out" (to represent the $75 of cash going out to purchase the asset).
*Note: Due to API limitations, Xero users are currently only able to access a monthly cash flow model.
Need additional help? Reach out to our support chat in the bottom right of your screen any time you have questions!