System Cash

Review how the forecasted Cash is calculated in Jirav and learn how P&L values and Balance Sheet movements impact Cash

Cash is the implied offset of any movement in Jirav - movements coming from P&L and Balance Sheet accounts. This article explains the concept of System Cash, detailing its calculation and the influence of the P&L and Balance Sheet inputs.

• System Cash
• Revenue Impact on Cash
• Expenses Impact on Cash
• Assets Impact on Cash
• Liabilities & Equity Impact on Cash
  
  

System Cash

Cash is the result of all inputs and assumptions used to build your financial 📈Plan.
System Cash is an Assets Account used to forecast your Cash balance and can be set from Settings ⚙️> Company > Plans > Assets > Cash:

All Balance Sheet accounts automatically rollforward the prior month's balance from Actuals by default so when your Forecast is not populated, there is no System Cash Increase or Increase coming from the 📈Plan and Cash is simply forwarded from the most current Actual month of the 📈Plan. See below:

Revenue Impact on Cash

Revenue (both Operating and Other Revenue) automatically increases System Cash in the same month. This means that $275,000 of Revenue in April 2024, increases Cash by $275,000 in April 2024.

If there is a delay between Revenue recognition in P&L and receiving the payment it should be planned using Balance Sheet Drivers or Forecast Settings. The Accounts Receivable Cash impact is also explained under the Assets Impact on Cash Section of this Article.

Expenses Impact on Cash

Expenses (COGS, Operating Expenses and Other Expenses) automatically decrease System Cash in the same month. This means that $24,000 of Cost of Sales in April 2024, decreases Cash by $24,000 in April 2024.

If there is a delay between Expenses recognition in P&L and paying for them, the A/P balance should be planned using Balance Sheet Drivers or Forecast Settings. The Accounts Payable Cash impact is also explained under the Liabilities & Equity Impact on Cash Section of this Article.

Assets Impact on Cash

Assets Increase automatically decreases System Cash in the same month. Similarly, Decrease of Assets automatically increases System Cash. 

Let's say that there is a delay between Revenue Recognition in P&L and receiving the payment:

• 20% of Revenue is paid in the same month when it's recognized
• 80% of Revenue is paid with a net 30-day delay

We can apply the above payment terms to the Accounts Receivable Forecast using Balance Sheet Drivers:

Driver Name: A/R Increase
Output: Assets $, Accounts Receivable, Driver Increase
Driver: Revenue $, All Departments, All Accounts, Range: This Month
fx: x
Rate: Constant 1
Start: Cutover Date
End: Max Date

Adding an Accounts Receivable Increase Driver that links Revenue from This Month to the A/R Increase results in netting Cash to zero.

Now, to impact Cash with the right payment terms we need to add two Balance Sheet Drivers - one for 20% as Net 0 Delay and 80% as Net 30 Delay:

Driver Name: A/R Payment: Net 0
Output: Assets $, Accounts Receivable, Driver Decrease
Driver: Revenue $, All Departments, All Accounts, Range: This Month
fx: x
Rate: Constant 0.2
Start: Cutover Date
End: Max Date

and

Driver Name: A/R Payment: Net 30
Output: Assets $, Accounts Receivable, Driver Decrease
Driver: Revenue $, All Departments, All Accounts, Range: Last Month
fx: x
Rate: Constant 0.8
Start: Cutover Date
End: Max Date



Adding Accounts Receivable Decrease Drivers automatically increases Cash (as payment is received).

 

Liabilities & Equity Impact on Cash

Liabilities and/or Equity Increase automatically increase System Cash in the same month. Similarly, Decrease of Liabilities and Equity automatically decreases System Cash in the same month.

This time, we will use Jirav's Forecast ⚙️Settings for A/P:

With this option, the system will assume that the AP expense forecast will be paid two months 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 (here: Professional Services, Marketing and Sales Expenses, Travel & Entertainment and Facilities):

The result of System A/P ⚙️Settings is:

• System A/P Increase impacts Cash Increase
• System A/P Decrease impacts Cash Decrease

A/P Accrual Accounts and System A/P Increase are netted to $0 Cash (no Cash Impact), so the only Cash impact is System A/P Decrease (payment done):

To summarize:

• ⬆️of Revenue impacts ⬆️Cash
• ⬆️of Expenses impacts ⬇️Cash
• ⬆️of Assets impacts ⬇️Cash
• ⬇️of Assets impacts ⬆️Cash
• ⬆️of Liabilities impacts ⬆️Cash
• ⬇️of Liabilities impacts ⬇️Cash
• ⬆️of Equity impacts ⬆️Cash
• ⬇️of Equity impacts ⬇️Cash