From my early career of working at a small, ten-employee company throughout my years with a Fortune 500 employer of over 60,000 people, one constant has always been true: Cash flow is essential. Acumatica ERP recognizes that fact and provides several technology tools to help you monitor and improve your cash flow—giving you the business intelligence you need to succeed.
Approval Maps vs. Monitoring
In this fast-paced world, our expectation that we will get things done immediately often necessitates that we abandon or curtail some of the bureaucracy of ages gone by. This increases our efficiency, but also increases our risk. In the world of cash flow, however, elevated risk is not something we should accept.
One effective alternative to bureaucracy is a solid monitoring and warning system. In this methodology, instead of having a gatekeeper that analyzes each transaction before it occurs, we set up the system to be a gate monitor to watch the activity as it occurs. Depending on the exact situation, this can be as good as, or even better than, the gatekeeper scenario. After all, what are we really trying to stop?
- Waste/fraud in high-dollar transactions
- Waste/fraud in multiple mid- and low-dollar transactions
Bureaucracy relies on the gray matter of the approver to recognize the above problems and either not approve them to proceed or take corrective action.
Monitoring relies on creating rules in the system that recognize the potential problems and notifying an authority to stop the transaction or to take corrective action. The keys to successfully implementing monitoring include ensuring:
- Solid, logical definition of rules for the system to monitor
- Timely notification and recognition of the potential problem
- Timely corrective action
- Utilization only when corrective action is possible
In modern times, some balanced implementation of both bureaucracy and monitoring, based on the criteria of the specific case, is warranted. Luckily, Acumatica ERP software provides robust tools for both methodologies via Approval Maps, with complex rules, notifications, and dashboards.
Cash Management Module
Acumatica provides four main screens for dealing with cash at the transactional level. These transaction screens allow you to quickly record customer payments, vendor refunds, bank charges and fees, cash withdrawals, and make various adjustments to these data sources. Beyond that, they gather transactional records from the rest of the system and present them in handy screens for the approval process or reconciliation.
Since a credit card or P-card can be a “Cash Account” in Acumatica, I encourage you to keep in mind as you read that the functionality for bank accounts is also available for credit cards as well. In later versions of Acumatica, there is even the ability to link corporate credit cards to cash accounts, providing the employees who have them with more functionality and reporting options. (See “Corporate Cards” screen CA202500 for more on this.)
Banking Transactions – Cash Entry
The cash entry screen is coupled with templates known as cash entry types. These entry types have two main flavors: The first is for making cash entries that affect only the balance of general ledger accounts and cash accounts. The second will affect the balance of cash accounts but will also result in the creation of Accounts Receivable transactions via customer balance changes, or Accounts Payable transactions via vendor balance changes.
Banking Transactions – Fund Transfer CA301000
Just like a cash entry, the fund transfer transaction screen is meant to record receipts and disbursements. In this case, the receipt occurs in one cash account and the disbursement occurs in another cash account. This entry can also include fees or interest entry types that would increase or decrease the final value deposited.
Furthermore, if Cash Account A belongs to Legal Entity A and Cash Account B belongs to Legal Entity B, the system will automatically generate due to and due from transactions for the entities involved. This ensures the entity level and consolidated financials remain up-to-date and consistent. Likewise, if currency management is set up in the system, the amounts and currency rate of Cash Account A do not necessarily have to equal Cash Account B. The gain or loss from this (foreign) currency transaction is automatically recorded in the system.
Banking Transactions – Bank Deposits CA305000
The bank deposit screen is meant to record multiple transactions from the system and group them into a batch deposit. This allows the AR module to update the individual customer account balances, while providing a single deposit for easy reconciliation with the banking statement.
At a former employer, we took payments from customers at our front desk. The clerk would process the receipt of cash payments as petty cash transactions and the receipt of check payments as check payments in AR. At the end of day, an electronic batch would be created to gather all checks into a single deposit using a check scanner. An entry was made on the “Bank Deposits” screen for all these checks, and the cost of using this technology was recorded against the daily batch.
Weekly cash was taken to the bank and deposited into the corporate checking account. This was recorded as a fund transfer from petty cash to the corporate cash account. Any fees for using the coin counter machine as opposed to rolling our own coins was recorded against these entries. Later, we were able to quickly create a report that showed the cost of accepting cash and checks this way, as opposed to alternate methods of receiving payments, such as ACH and credit cards.
Banking Transactions – Reconciliation Statements CA302000
The reconciliation statement screen allows for periodic comparison and balancing of your cash accounts. The upper portion of the screen contains information about the current time frame being evaluated, the beginning balance, the current ending balance as seen on the statement, and a set of calculations based on actions taken in the lower section.
In the lower portion of the screen is a list of all transactions and amounts that have occurred anywhere in Acumatica regarding the cash account being reconciled. Two checkboxes and a date for recording the clearance of the item allow for interaction with the reconciliation statement.
The first checkbox is labeled “Cleared,” and is meant to highlight items that have been processed by the cash account entity; in other words, they have cleared the “bank.” This checkbox can be set here or may have been set in the AR module or via an automated processing of bank statements which will be discussed later in this article.
The second checkbox is labeled “Reconciled.” This checkbox should be set upon comparison with the external “bank” statement items and the items in the lower portion. Checking this box will cause the amount of the line, either receipt amount or disbursement amount, to be added to the appropriate reconciled balance summation in the upper portion. A field labeled “Difference” in the upper portion is then calculated from the total reconciled balance less the statement balance.
Note how the changes from the green to blue section change the values presented in the orange to red sections.
Banking Transactions – Import and Process Bank Transactions CA306500 & CA306000
This next functionality is one of the real gems in Acumatica. I encourage clients that can take advantage of this functionality to do so, as the ROI is very high in most cases. The functionality itself uses two screens—an importing screen and a processing screen.
The importing screen processes bank files of the .ofx (open financial exchange standard), .qbo (QuickBooks online) or .qfx (Quicken file exchange) types. Excel or CSV files can also be used if they meet the minimum necessary fields. Once imported, the data is available on the processing screen.
The processing screen features a series of transaction match settings that can be used to fine-tune which fields from the banking statement are given more weight. For example, matching a Ref Number should carry more weight than the date of transaction, since a “bank” posting transaction date may differ from the system transaction date because the “bank” does not always process transactions the same day.
The system is then run to auto-match the transactions. It processes the transactions, looking for the best match of existing payments in the system, then checking for invoices without matches. All transactions are then noted, providing a set of matches with a calculated match relevance score. The end user can review the matches and choose to accept these matches or to unselect them as matched. The end user can then review all unmatched records and use their own gray matter and knowledge to manually select these other matches.
If payments for invoices do not exist, the end user also has the option to have Acumatica ERP create them automatically with the information on-hand or with alterations made by the end user. After processing, the AI can evaluate the match selections and suggest new matching/creation rules to be created, or recommend modifications to existing rules. In this way, each successive run becomes more accurate and takes less time to process.
Banking Transactions – Processing Centers CA205000
This screen is used to set up the information that connects Acumatica to a third-party processing center. These processing centers use Acumatica data to collect payments on your behalf and deposit them into your account. Some of the options include processing multiple currencies; not storing credit cards in Acumatica but storing them in the third-party systems, which improves security; blocking payments on new credit cards; and limiting multiple cards per account.
Additional functionality exists for Capturing Payments AR511500, Generating Payments AR511000, Notifying Expiring Cards AR512000, Deactivating Expiring Cards AR512500 and Synching Card Data CA206000 to further enhance interacting with your customers and these process centers.
Cash Flow Forecast
Forecasting cash flows should be performed a month, or thirty days, in advance. A cash forecast includes information of all known cash receipts expected to come in and all known payments anticipated to go out. The goal is to avoid expected shortfalls and properly plan for payments out.
Acumatica uses the data in the system to generate three main areas of information for cash data visualizations:
- The Cash Summary, or projected balance of Cash account;
- The Cash Receipts section, showing everything coming in from a customer; and
- The Cash Paid Out section, showing all outgoing payments to be sent.
Acumatica does this by analyzing several document types in its calculations, and has optional settings for a few others.
- Bills and debit/credit adjustments to vendors
- Invoices and debit/credit memos to customers (unapplied amounts only)
- AR payments (applied amounts only)
- Vendor prepayments
- Customer prepayments
- Anticipated cash transactions
- Unreleased bills, adjustments, invoices, and memos
- Recurring documents scheduled for the dates within the forecast’s period
- Unapplied payments
- Documents in which no cash account is specified (unless a default cash account is indicated, and includes documents with no cash account setting enabled)
Anticipated Transactions CA305500
Because using only system data may not reflect the known situation, Acumatica provides a method for manually adding additional known upcoming transactions either from anticipated sales or for known expenditures into the system. These transactions are not financially posted, but used only in the forecasting calculations.
Cash Flow Forecast CA401000
This screen allows us to determine the settings previously discussed to display the value in any currency, as well as see the items that are going to impact cash flow for the next thirty days after our selected start date. Coupling this report with a solid understanding of the business and strong investigative skills will help to make sure that there is never a cash shortfall to cover those items we need to continue operating.
Other Useful Tools for Cash
A good business dashboard like the controller dashboard pictured below can further enhance your view into your cash situation by knowing who is not paying and who you anticipate owing. Each of these tiles is focused on watching the money. Likewise, a good sales pipeline dashboard will keep those invoices and payments flowing, as well as warn of corrective action that needs to occur.
Getting as much data into the system as possible is key to having a solid cash forecast, and recurring transactions help with that. When costs or revenue are consistent month over month, a recurring transaction is an easy way to enter that data and ensure it is accounted for, recorded within the system even before the checks have gone out or come in.
Budgeting & Allocations
Once you have an idea on the state of your money, the next steps are about understanding where that money is going and how to get the most value out of every cent. Acumatica further supports you in those endeavors by using built-in budgeting that can be compared directly to your real-time financials.
Furthermore, you can set up automated transactions for allocations of expenses or revenue across departments, product lines, or any of your dimensional accounting needs, implemented with Acumatica’s built-in Subaccount system from the Allocations screen.