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ShelbyNext | Financials: Build a Monthly Cash Flow

Statement (Course #F220)

Presented by: Dave Heston Shelby Consultant

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Objective

The objective of this session is to discuss what a Cash Flow Statement is, how to build a Cash Flow Statement, and how to run this report in ShelbyNext | Financials (SNF).

The following topics are presented in this session:

• What is a Cash Flow Statement?

• Options for a Cash Flow Statement. (per GAAP)

• How to build a simple Cash Flow Statement.

• Running Special Reports.

• Verify with Statement of Financial Position.

• Cash Flow Statement with additional detail.

• How to use Special Reports to show unrestricted available cash.

• Additional Tips!

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What is a Cash Flow Statement?

• The Cash Flow Statement is derived from both income statement and balance sheet transactions.

• If the income statement is prepared under the accrual basis of accounting, revenues reported may not have been collected – they are receivables. Similarly, expenses reported on the income statement might not have been paid – they are payables.

• The Cash Flow Statement reports both cash received and disbursed during a specific period of time.

• This is determined by looking at three components by which cash enters and leaves a church/ministry: operations, investing, and financing.

• Not all transactions involve actual cash items (e.g. depreciation).

• Adjustments need to be made because of transactions that determine changes in cash.

Changes in accounts receivable – ???

Changes in pledges receivable – ???

Changes in fixed assets – ???

Changes in payables – ???

Changes in accruals – ???

Changes in short and long term debt balances – ???

• Things to think about:

What do you want the report to look like?

Which comes first, Groups, Sub-Groups or Lines?

Sketch it out group by group and line by line.

List the account(s) to be included on each line.

NOTE: The amount of cash at the beginning of the month or year, plus or minus all revenue and disbursements reported in the Cash Flow Statement, should equal the ending cash balance that is reported on the Statement of Financial Position at the end of the month.

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Options for a Cash Flow Statement (Per GAAP)

The Cash Flow Statement for a nonprofit organization reports the ministry’s change in its cash and cash equivalents during a defined accounting period.

The Cash Flow Statement consists of three sections

1. Operating Activities – Any transactions that enter into the determination of the unrestricted net income are classified as operating activities.

• Cash receipts from: general fund contributions, designated contributions, interest income, activities income, registration fees, rental income, etc.

• Cash payments for: salaries & benefits, operations, facilities, ministry, interest, missions, etc.

2. Investing Activities – Any transactions for the acquisition or disposal of non-current assets

• Cash can be provided by sale of property or equipment, collection of loans from another entity, etc.

• Cash can be used to purchase property, buildings, or equipment; purchase securities; lending cash to another entity; etc.

3. Financing Activities – Any transactions involving borrowing from creditors (other than payment of interest)

• Cash can be provided by borrowing from short-term or long-term creditors through line of credit, notes, bonds, mortgages, etc.

• Cash can be used to retire debt.

While the Cash Flow Statement may be a bit difficult to prepare, it is an important financial statement to be read.

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The use of Special Reports is required to create and run a Cash Flow Statement in ShelbyNext.

Because the Cash Flow Statement is heavily dependent upon your chart of accounts, the Cash Flow report is found under Modify > Special Reports. You must design a Cash Flow report before you can run the report. The Cash Flow report is primarily used to print the current balances/activities for each line of the report. When adding or editing a Group, you can specify the Description, whether you want to Reverse sign when printing, Show Heading, and where you want to Include Under. This is a drop-down list allowing you to select whether to position the group at the top or place it under another group. The option to Reverse sign when printing has a special function when using the Cash Flow report. If this option is not selected, the amount printed on the Cash Flow report is the opening balance. Cash account(s) are selected with the option not selected. If this option is selected, all other accounts that affect the cash balance print amounts for the current period or YTD. When adding or editing a Line, you can specify the Description, whether you want to Reverse sign when printing, and where you want to Include Under. After setting up the special report click the Cash Flow report on the right panel under Report(s) Selection. This displays the Preferences window for that report. Make your selections and customizations.

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Cash Flow Statement Explanation

1. Beginning Cash Balance: This represents the beginning cash balance either for the current period or the beginning of the fiscal year. When creating the Lines in the report the key is not to check the “reverse sign” option. In this example, each bank account is listed separately and with a total. You can include all the cash into one Line.

2. Church Operations(Net Budget): All the budget income is included on one Line. It

would include Tithes/Offerings and other activity income for the church. All budgeted expenses are included on one Line. The net reflects the difference in budgeted income less budgeted expenses.

3. Donor Restricted(Net): All the Donor Restricted income is included on one Line. All

designated expenses are included on one Line. The net reflects the difference in Donor Restricted income less expenses.

4. Changes in Other Current Assets: Each Line represents changes in other current assets.

5. Fixed Assets Purchases: This represents additions to fixed assets. (let’s talk about this)

6. Change in Liabilities: Each Line represents changes in liabilities that represent changes in cash. The order and compiling of each Line is up to the user.

7. Ending Cash Balance: This represents the difference between the Beginning Cash

Balance and each section below it. This balance is derived from the Group in the special reports set-up. It should match the total cash for the period on the Balance Sheet.

Changes in Net Assets: This would include all Net Asset accounts which would be direct postings Net Asset or “Capital” accounts. It would be rare to post directly to these accounts.

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Use Special Reports to Create a Cash Flow Statement

• From the General Ledger menu, select Modify -> Special Reports Setup.

• Modify Special Reports Setup allows you to set up and edit your special reports. 1. Click Filters on the blue bar above the grid if you want to narrow down your

displayed reports. 2. Click the Add New Report button above the grid to add a new special report

manually. 3. The Auto Generate New Report button allows you to generate a special report

automatically. 4. If your chart of accounts is altered, you receive a message above the grid

informing you of this fact and prompting you to review your reports to see if you need to make any changes.

5. Click the Report of changes button to bring up a report displaying all changes to the chart of accounts. You can also click the Clear Change Flag link to remove this warning.

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• General Ledger > Modify > Special Reports Set-Up > Add New Report

o First, give the report a Title.

o “Ending Cash Balance” is the top level Group. Each of the other Sub-Groups are set up under “Ending Cash Balance”.

o Groups create totals within Special Reports much like Groups within the chart of

accounts. Instead of grouping of account number ranges, the special report design allows for Lines within each Sub-Group that can be individual accounts, a range of accounts, or random accounts within the chart of accounts. The Lines within Sub-Groups can cross all funds cost centers and departments.

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• Ending Cash Balance Group o This Group is created first and is “Included under - positon at top”. This actually

is the grand total at the bottom of the report. All other Sub-Groups are included under this Group. Show Heading is not checked because this creates a header at the beginning of the report if checked.

• Beginning Cash Balance Sub-Group and Lines.

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• Sub-Group Settings o Reverse sign when printing not checked --- see notes later on this.

o Show Heading creates a header for the Group.

o Note this Group and all the Sub-Groups are included under “Ending Cash

Balance”

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• Cash Account Lines o The Reverse sign when printing is not checked o This bank account Line is included under the Group – “Beginning Cash Balance”.

• The critical piece to make the Cash Flow Statement work is the proper use of “Reverse sign when printing” option.

o Not checking the Reverse Sign when Printing option causes the report output to

reflect the opening Cash Balance. When connecting to the Cash Flow Statement report there are two options: Opening cash balance for the Current Period Opening cash balance for beginning of Fiscal Year.

o Cash accounts should be the only accounts where this is not checked.

o In this example, each cash account is listed as a separate Line. They could be

rolled up into one Line if desired.

o All other Balance Sheet items should have the Reverse sign when printing option checked. This will make the report output reflect the changes in the balance sheet account.

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• Church Operations(Net Budget) Sub-Group settings o Show Heading creates a header for this Sub-Group. o This Sub-Group Included under “Ending Cash Balance”.

• Church Operations Income Lines within the Sub–Group “Church Operations(Net Budget)”

o Check Reverse sign when printing. o This Line includes Cost Center 5, all Departments, with an Account range 40000-

49999 which picks up all income accounts in all Cost Center 5 departments. o This Line is included under the Sub-Group “Church Operations(Net Budget”.

• Church Operations Expense Line within the Sub–group “Church Operations(Net Budget)”.

o Check Reverse sign when printing. o This Line includes Cost Center 5, all Departments, with an Account range 50000-

70000 which picks up all expense accounts in all Cost Center 5 departments. o This Line is included under the Sub-Group “Church Operations(Net Budget”.

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• Donor Restricted(Net) Sub-Group and Lines Sub-Group settings

Income Line settings

Expense Line settings

All Donor restricted income and expense accounts are in Cost Center 10 in this chart of accounts. Income 40000-49999 and expenses 50000-60000.

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• Changes in Other Current Assets Sub-Group o Show Heading creates a header for this Sub-Group o This Sub-Group included under “Ending Cash Balance”

• Changes in Other Current Assets Lines o Each Line is marked with Reverse sign when printing. o Each Line can be a single account or range of assets accounts that represent cash

changes for those asset accounts. In this example, the Line includes only balance sheet account 13300 Pledges Receivable.

o In this example, the Line only includes only balance sheet account 13100 Accounts Receivable Pre-School.

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• Changes in Fixed Assets Sub-Group o This would be necessary if fixed assets purchased are capitalized upon purchase. o Many churches handle purchases of fixed assets in different ways. Some

churches budget for purchases of fixed assets. o In this example all fixed asset purchases are capitalized to an asset account when

purchased. o Show Heading creates a header for this Sub-Group o This Sub-Group included under “Ending Cash Balance”

• Fixed Assets Purchased Line o Each Line is marked with Reverse sign when printing. o Each Line can be a single account or range of fixed asset accounts that represent

cash changes for those accounts. In this example, the Line includes fixed asset accounts 15100 to 15600.

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• Change in Liabilities Sub-Group o Setting this up depends on if you are on a cash or accrual basis of accounting. o Show Heading creates a header for this Sub-Group. o This Sub-Group included under “Ending Cash Balance”.

• Changes in Liabilities Lines o Each Line is marked with Reverse sign when printing. o Each Line can be a single account or range of assets accounts that represent cash

changes for those asset accounts. In this example, the Line includes accounts payable and credit cards payable accounts 21100 to 21110 (and all sub-accounts)

o If there are liability accounts for notes payable and the principal payments are recorded directly to the liability accounts, you need to set up a Line for this. In this example, the Line includes note payable accounts 23100 to 24100.

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• Change in Net Assets

o Normally no direct postings are made to Net Asset accounts. o If you do post directly to Net Assets account you will need set up a Sub-Group

and Lines in your report.

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Link Special Report to the Cash Flow under Report(s) Selection

• Choose Cash Flow from the list of reports. • This where you can select either Current Period or Year to Date option for the Cash

Flow Statement output.

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Home > General Ledger > Special Reports > Update > Expand All

• Note Groups, Sub-Groups and Lines

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• Print Report Set-Up o Select one or more reports and click the View Setup List button to view

the Special Report Setup List window where you can select your report preferences: •Show General Ledger Links: This option displays the individual records

that make up the lines in the special report. •Show Account Details: This option displays the details of accounts

within each line on the special report. o Selecting both options displays the complete breakdown of the special report.

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o Show General Ledger Links

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o Show Account Details

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Running Special Reports • Home > General Ledger select

o Reports o Special Reports

o Check your Current Financial Settings > Period o Select the Special Report (Cash Flow) o Run Report

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Verify with Statement of Financial Position

• Statement of Financial Position with Current YTD and Prior Period o This report shows the current YTD (February) and Prior Period (January) o The Total Cash in the Prior Period column should equal the Beginning Cash

Balance on the Cash Flow Statement. o The Total Cash in the YTD column should equal the Ending Cash Balance on the

Cash Flow Statement.

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Cash Flow Statement with additional detail

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How to use Special Reports to show unrestricted cash available

This format uses Special Reports to roll-up accounts and subtract from Cash accounts. This is not a Cash Flow Statement but is extremely helpful in looking at unrestricted (available) cash.

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Additional Tips 1. Your chart of accounts is the key to Special Reports.

2. The more consistent your chart of accounts is, the easier it is to design your Cash Flow Statement.

3. If your Church has two or more funds, it is very important to watch the chart of accounts so that accounts from both funds are included.

4. Think about what you what your report to look like, FIRST. 5. Groups come first.

6. Create a “Main Group”.

7. Create Sub-Groups as needed.

8. Add your Lines under your Sub-Groups.

9. Should you separate each fund’s Income and Expenses?

10. If you are on Accrual Accounting, be sure you include changes in assets and liability accounts on your report.

11. Link to the Cash Flow report.

12. Now GO FOR IT!!!!!!!

Dave Heston Shelby Consultant

dave.heston@shelbyinc.com

Dave served as an accountant for a Phoenix-based CPA firm before he joined the staff of his church in 1977. Over the last 40 years Dave has served as an administrator at three churches in the Phoenix metro area. Dave recently retired as the Director of Finance for Phoenix Seminary in AZ. Dave has been a Shelby user since 1985 and trains as a Shelby Consultant training on Shelby v.5 and ShelbyNext | Financials.

ObjectiveThe following topics are presented in this session:What is a Cash Flow Statement?dave.heston@shelbyinc.com