Overview: Plan for Accounts Receivable & Accounts Payable

Configure system settings to forecast Accounts Receivable & Accounts Payable

Accounts Receivable can be planned for based on an average of how quickly you expect to collect on a sale. For example, if you invoice a customer, do you expect them to pay immediately upon receipt, or will they typically pay the following month? Likewise, Accounts Payable can be planned based on how quickly you expect to pay bills on average. 

To configure the A/R & A/P settings, go to go to Settings ⚙️ > A/R and A/P.

The settings selected here apply to all plans that have not previously been designated as a Plan of Record.

Accounts Receivable

To forecast accounts receivable (A/R), choose the desired forecasting method as outlined below.

A/R Foreasting Method: None

With this option, there is not a system wide methodology applied to A/R forecasting. Accounts receivable can still be planned using regular balance sheet plan drivers and data input as needed. 

A/R Forecasting Method: Delayed Days for Collection

With this option, accounts receivable is planned by considering the Revenue forecast and assuming a collection delay. For instance, if you choose a Net 30 A/R Delay, the system will assume that the Revenue forecast will be collected one month after it is planned for. The setting also has an impact on how the A/R Balance as of the last month of Actuals is collected. 

Once you choose this A/R Forecasting method, the system will prompt you to select the desired A/R account for forecasting and the corresponding A/R delay. 

Please note that bank (cash) accounts cannot be selected for forecasting A/R.

The calculation for A/R will be as follows based on the A/R Delay selected:
  • A/R Delay Net 0
    Prior Month A/R Balance - Last Month Actual A/R Balance (first month of plan only) + Current Month Revenue - Current Month Revenue 
  • A/R Delay Net 30
    Prior Month A/R Balance - Last Month Actual A/R Balance (first month of plan only) + Current Month Revenue - Prior Month Revenue
  • A/R Delay Net 60
    Prior Month A/R Balance - 50% Last Month Actual A/R Balance (first month of plan only) - 50% Last Month Actual A/R Balance (second month of plan only) + Current Month Revenue - 2 Months Prior Revenue 

An Example

If the A/R Balance in January was $10,000 and you had a sale of $1,000 in February, A/R balance would calculate as shown below based on the A/R Delay. 

  January February March April May
Period Type Actual Plan Plan Plan Plan
Sales   $1,000      
           
A/R Balance: Net 0 $10,000 $0 $0 0 $0
Net Cash Impact: Net 0   $10,000 Cash Increase      
A/R Balance: Net 30 $10,000 $1,000 $0 $0 $0
Net Cash Impact: Net 30   $9,000 Cash Increase $1,000 Cash Increase    
A/R Balance: Net 60 $10,000 $6,000 $1,000 $0 $0
Net Cash Impact: Net 60   $4,000 Cash Increase $5,000 Cash Increase $1,000 Cash Increase  

Accounts Payable

To forecast accounts payable (A/P), choose the desired forecasting method as outlined below.

A/P Forecasting Method: None

With this option, there is not a system wide methodology applied to A/P forecasting. Accounts payable can still be planned using regular balance sheet plan drivers and data input as needed. 

A/P Foreasting Method: Delayed Days for Collection

With this option, accounts payable is planned by considering the expense forecast and assuming a payment delay. For instance, if you choose a Net 30 A/P Delay, the system will assume that the AP expense forecast will be paid one month after it is planned for. The setting also has an impact on how the A/P Balance as of the last month of Actuals is collected. 

Once you choose this A/P Forecasting method, the system will prompt you to select the desired A/P account for forecasting, the corresponding A/R delay and the expense accounts that are typically paid through A/P. his is typically all COGS & OpEx accounts less salary related accounts, depreciation and any other non-cash expenses. 

Note, the accounts that are available to select as A/P Accrual Accounts will be all of the expense accounts in your account from the COGS, OpEx and Other Expense sections of the COA.

The calculation for A/P will be as follows based on the A/P Delay selected:

  • A/P Delay Net 0
    Prior Month A/P Balance - Last Month Actual A/P Balance (first month of plan only) + Current Month Expenses - Current Month Expenses as defined by the A/P Accrual Accounts
  • A/P Delay Net 30
    Prior Month A/P Balance - Last Month Actual A/P Balance (first month of plan only) + Current Month Expenses - Prior Month Expenses as defined by the A/P Accrual Accounts
  • A/P Delay Net 60
    Prior Month A/P Balance - 50% Last Month Actual A/P Balance (first month of plan only) - 50% Last Month Actual A/P Balance (second month of plan only) + Current Month Expenses - 2 Months Prior Expenses as defined by the A/P Accrual Accounts

An Example

If the A/P Balance in January was $5,000 and you had a total of $600 in expenses that run through A/P in February, the A/P balance would calculate as shown below based on the A/P Delay. 


  January February March April May 
Period Type Actual Plan Plan Plan Plan
COGS - Hosting Fees   $150      
Professional Fees   $200      
Consulting/Contractors   $50      
Travel & Entertainment   $75      
S&M Expense   $125      
Total Expense Running Through A/P (A/P Accrual Accounts)   $600      
           
A/P Balance: Net 0 $5,000 $0 $0 $0 $0
Net Cash Impact: Net 0   $5,000 Cash Decrease      

A/P Balance: Net 30

$5,000 $600 $0 $0 $0

Net Cash Impact: Net 30

  $4,400 Cash Decrease $600 Cash Decrease    
A/P Balance: Net 60 $5,000 $3,100 $600 $0 $0
Net Cash Impact: Net 60   $1,900 Cash Decrease $2,500 Cash Decrease $600 Cash Decrease