Cash Flow Report - Cash-Basis vs Accrual-Basis Accounting

I’m doing an analysis on the Cash Flow report, following the accounting we have two formats:

  1. Cash Base
  2. Accrual-Basis Accounting

Currently in ERPNext if I sell a product for $1200 and I will receive it in 12 installments of $120, the system will show $1200 in cash flow in the month the sale took place…

That’s not wrong, it’s right, but it’s a cash flow called “Accrual-Basis”.

I’m trying to make the Cash Flow report work in “Cash Base” format, showing the amounts based on the payment/receipt schedule of the sales invoice or purchase invoice…

With this format following the example above, I will see $120 each month for 12 months.

I would like to know if ERPNext currently already meets this demand, or I would have to develop it.

Reference: https://www.netsuite.com/portal/resource/articles/financial-management/cash-basis-accrual-basis.shtml

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Hi there,

From your description, I’m not sure which of these two things you’re trying to do:

  1. Do your books on a cash basis and have the Cash Flow statement accurately reflect that, or
  2. Do your books on an accrual basis and have the Cash Flow statement simulate a cash basis (sot of?) by replacing accounts receivable with forecasted revenue

If it’s (1), ERPNext is probably not the right tool for you. You can do cash basis accounting with ERPNext by recording everything as journal entries, but most other doctypes/reports are designed for an accrual basis.

If it’s (2), you can definitely do what you want, but I don’t believe it’s available out of the box. You’d have to create a custom report.

I want to make ERPNext work with cash flow based on “1- Cash Base”.

The biggest difficulty for companies that sell where the customer pays in the long term, basically in installments 2x, 3x, 4x…

It’s knowing if you will have money to pay expenses based on the cash flow of payments that will be received in installments…

Currently ERPNext does not work based on the installment, this is just a small change in the cashflow report, we have already developed it but I ask on the forum to discuss and know what people are thinking about it, why in accounting there are these two flow models which are VERY important depending on how the company receives its sales.

Cash Base is a cash flow model for short term analysis, example: weekly, monthly

The issue here is more than just reporting formats. Pretty much all transactional documents book income against accounts receivable, for example. If you want to do cash basis accounting, it’s possible with ERPNext, but there are likely much better tools out there for you.

More broadly, I think what you’re describing is less the job of a cash flow statement and more the job of a liquidity projection report of some sort. I’ve not personally ever seen a cash flow statement that managed anticipated payments.

I think I have the same requirement/disadvantage @PHF but I don’t quite understand why @peterg sees it as something weird.

The current cashflow is one of the reports that accounting is presented in an accounting settlement, but it would be missing what is called cashflow better said to provide between debt and income as the cash flow in the coming months/weeks. Especially when handling checks.

My accounting knowledge is not the best, that’s why I just take advantage of the post to understand better about this.

thanks.

Hi @federico_calvo,

I don’t think I’ve ever suggested that what OP is asking is weird. Cash basis accounting is very common and sensible for many businesses. It’s just not what ERPNext was designed to do.

I can definitely see why a report that projects anticipated receipt of payments would be very useful. But, at least as far as I understand it (I’m not an accountant either), that’s not what cash flow statements are meant to represent.

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i dont want all transaction accounting based on payment schedule, just the cash flow show data based on payment schedule.

it’s not hard to do… when we got a a sales invoice or purchase invoice we can mananger and show on cashflow based on payment schedule

Two reports that already use this logic are:
Accounts Receivable
Accounts Payable

The two reports take the data from the GL Entry table and do the separation based on the payment schedule

Unfortunately, I’m still not really understanding your answer to the question I asked in my first post. Earlier, you seemed to be answering (1), but now you seem to be answering (2). Leave aside the cash flow statement for a moment: what is your accounting basis – cash or accrual?

Indeed, it is not hard to do. It would be very possible to create a report based on payment schedule. That is not what the cash flow report is for, however.

So, a company can use both cash flow methodologies, when it is listed on the stock exchange it reports with the Accrual-Basis Accounting, the accounting of this company will be totally based on this cash flow.

HOWEVER, in day-to-day management, to really have control of cash flow in a shorter period, controlling receivables and payment responsibilities, a cash flow with the Cash Base methodology is necessary. Being able to view in smaller period and based on payments.

So, answering your first question, the entries in the accounting book can be posted as Accrual-Basis Accounting, just a report that allows viewing in Cash Base.

Great, that’s exactly what I was asking in my first question. So, the answer is (2), not (1).

I’m not an accountant, and I’m definitely not an accountant in your company/country, but I’ve never seen a cash flow statement calculated on the basis of payment schedules. It would be relatively straight forward to build such a thing (using a script or query report), but it is not a standard feature of the cash flow report and I wouldn’t expect it ever will be.

It’s possible that there is another report bundled with ERPNext that does what you’re describing, but if it exists I am not aware of it.

Cash flow based on cash, aims to be a projected cash flow.

It works like a daily cash flow monitoring, but with bills to be paid, including personnel, suppliers, supplies and all other expected expenses.

The same in relation to revenues, accounts receivable from customers, income from investments and others are reported