Overview: Plan for Accounts Receivable & Accounts Payable

Configure system settings to forecast Accounts Receivable & Accounts Payable

Accounts Receivable can be planned 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 ⚙️ > Forecast:

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

• Accounts Receivable
  
  • A/R Forecasting Method: None
  • A/R Forecasting Method: Delayed Days for Collection
  • A/R Forecasting Method: Trended Percent of Revenue
• Accounts Payable
  • A/P Forecasting Method: None
  • A/P Forecasting Method: Delayed Days for Collection
  • A/P Forecasting Method: Trended Percent of OpEx

 

Accounts Receivable

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

A/R Forecasting 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. 

Learn more about using balance sheet plan drivers for AR here. 

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.

An Example

Let's say your monthly revenue forecast is $200,000 in June, $250,000 in July, and zero for the rest of the year. The accounts receivable balance was $630,235 as of the last month of actuals, May. This scenario will help illustrate how each forecasting option operates.

Accounts Receivable: A/R Delay Net 0

• AR Increases in all months by Current Month's Planned Revenue
• AR Decreases in all months by Current Month's Planned Revenue 
• AR Decreases in the first month of the forecast by the Balance of AR as of the Last Month of Actuals 

Accounts Receivable: A/R Delay Net 30

• AR Increases in all months by Current Month's Planned Revenue
• AR Decreases in all months by Previous Month's Planned Revenue 
• AR Decreases in the first month of the forecast by the Balance of AR as of the Last Month of Actuals 

Accounts Receivable: A/R Delay Net 60

• AR Increases in all months by Current Month's Planned Revenue
• AR Decreases in all months by Planned Revenue from 2 Month's Prior
• AR decreases in both the first and second month of the forecast by evenly dividing the Balance of AR as of the Last Month of Actuals between the two months

A/R Forecasting Method: Trended Percent of Revenue

With this option, Accounts Receivable is planned by calculating historical A/R as a % of Revenue- based on trailing months average- and multiplying by Forecasted Revenue.

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 trailing months. 

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

The calculation for A/R as a percentage of Revenue is the balance of all accounts marked as Accounts Receivable divided by total Revenue. The accounts marked as Accounts Receivable are labeled with a proceeding (A/R) in the Chart of Accounts (COA). Tag or untag accounts as Accounts Receivable by selecting the ellipsis (. . .) to the left of the account name. 

Note:

• It is only recommended to use the Trended percent of Revenue A/R Forecasting method when Revenue is also forecasted based on a trend.

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 Forecasting 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/P delay, and the expense accounts that are typically paid through A/P. This 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 ran through A/P in February, the A/P balance would be calculated as shown below based on the A/P Delay. 

A/P Forecasting Method: Trended Percent of OpEx

With this option, accounts payable is planned by calculating historical A/P as a % of OpEx- based on trailing months average- and multiplying by Forecasted OpEx.

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

The calculation for A/P as a percentage of OpEx is the balance of all accounts marked as Accounts Payable divided by total OpEx. The accounts marked as Accounts Payable are labeled with a proceeding (A/P) in the Chart of Accounts (COA). Tag or untag accounts as Accounts Payable by selecting the ellipsis (. . .) to the left of the account name. 

Note:

• It is only recommended to use the Trended percent of OpEx A/P Forecasting method when OpEx is also forecasted based on a trend.