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 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.
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 |
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 a 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. Tag or untag accounts as Accounts Receivable by selecting the ellipsis (. . .) to the left of the account name.
Notes:
- Trended A/R may not be available in your account at this time - please contact support@jirav.com an email if you would like to have this functionality enabled in your account
- 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/R 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 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 |
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 a trailing months average- and multiplying by Forecasted Revenue.
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.
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 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. Tag or untag accounts as Accounts Payable by selecting the ellipsis (. . .) to the left of the account name.
Notes:
- Trended A/P may not be available in your account at this time - please contact support@jirav.com an email if you would like to have this functionality enabled in your account
- It is only recommended to use the Trended percent of OpEx A/P Forecasting method when OpEx is also forecasted based on a trend
Additional Resources: Company Setup, Accounts Receivable Tips & Tricks, System Accounts Payable FAQs