Audaz now brings you an advanced new Cash Flow in B1 based on the indirect method. The standard Cash Flow in SAP B1 is based on a template driven system that is a bit challenging to maintain. In fact, in order to use the Indirect Method Cash Flow Statement you must go through the process of defining the layout and adding each relevant account in the appropriate location on your template, as explained in our post “SAP Business One Cash Flow Statement”. The new Cash Flow in B1 by Audaz is based on the indirect method. There is still some minimal setup but no need to create and maintain a template.
The majority of companies within the U.S. use the indirect method for cash flow reporting. This method looks at sources and uses of funds to determine how cash was provided or used. There are three major sections in the statement: Operating, Investing and Financing Activities.
Under the cash flow from operating activities section, you will find the total cash provided to the operations of the company. This is expressed through the Profit and Loss statement. After the Net Income amount, the report shows adjustments to Net Income to derive actual cash flows from these activities. The first of these adjustments is for non-cash items like depreciation and gains or losses on the sale of equipment. The rest are typically current assets and liabilities. If you’ve increased your Accounts Payable then you have essentially secured financing for more cash, albeit for a short term.
There are outlays and receipts of cash which are not tied to everyday operations. One of these is investing activities. Investing activities include things like purchasing new equipment or buying a new production plant.
The last category of cash flow is Financing Activities. With most companies, cash comes and goes unevenly. This requires some cash management to make sure that company assets are getting proper returns. If you have too much cash, then you will generally get lower returns. On the other hand, if you have too little, you may have trouble paying suppliers. Typical sources of financing include long-term debt like bond issuance or equity such as common stock.
The final section of the Cash Flow Statement for SAP B1 is the summary of cash. This presents the sum of the three areas of sources and uses of cash, followed by the beginning cash balance and the ending cash balance. If you add the total flow to the beginning balance, it should equal the ending balance. These balances should also articulate back to the Balance Sheet and Trial Balance.
You can find the report here.