Saturday, February 14, 2009

Using a Couple of QuickBooks’s Reports to Better Manage Cash

score_tjpg_Ginnaty This article was written by Dick Ginnaty, CPA

Cash is always king, but in tough times it is more so, and a couple of Quick Book’s reports can help manage it. Under “Reports” in QuickBooks, there are two reports you should monitor to help you understand and manage your cash. Specifically, the reports are the “Statement of Cash Flows”, and the “Cash Flow Forecast” listed under the “Company & Financial” section of the reports.

The Statement of Cash Flows shows where the cash has been spent and where it has been generated for the period in question (month, quarter or year). The flows are organized into three broad areas; Cash Flow from Operations, Cash Flow from Investment, and Cash Flow from Financing. The goal in general is to generate positive cash flows (increases in the Company’s cash position) from operations. Such operating sources as net cash income from the period, and the collection of accounts receivable, are listed along with the uses of cash such as pay down of accounts payable, and addition of more inventory. Over time, by reviewing this report, you will understand where the cash goes, and where, through better cash management, you might be able to generate additional cash.

The second report is the “Cash Flow Forecast” which forecasts cash flow in the future based on the expected receipt of cash from the collection of receivables, and the expected payout of cash from the payment of accounts payable. The timing of the outflows and inflows is based on the terms of payments for each customer and vendor and the current amounts due or payable for each. This report is useful to estimate the cash position of the company on a short term basis (one to two months). Longer term cash forecasting requires planning which is a topic for another column.

Good luck and here’s hoping it “all adds up” for you.

(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at and if it is of general interest, he will address it in future articles)