Cash is King, so they say. This is especially true for small and mid-sized businesses and particularly those who are growing rapidly. The Cash Flow Statement or Sources and Uses of Funds as it was called by the accounting world for years, is a primary report used to measure how well a company is doing with their cash. This post discusses the SAP Business One Cash Flow Statement and some of the requirements for getting the information you need.
Direct vs Indirect Method
The governing body for accounting has long proposed the use of the Direct Method of Cash Flow reporting. While this method provides more insight and details to how cash has been used, it is more complex to track and report. For this reason, the majority of U.S. companies utilize the Indirect Method of Cash Flow reporting.
The direct method essentially requires identification of the cash impact of almost every transaction. The indirect method, however, utilizes the changes in balances from the beginning of a period to the end of the period to generate the cash flow. While you can put rules in place to assist with the capture of details for the direct method, it does require more setup time and closer monitoring to ensure that nothing slips through the cracks.
Look at the format side-by-side:
Sample Direct Method Format
Sample Indirect Method Format
SAP business One can handle either method; however, 95+% of companies use the indirect method. Here is a high-level overview of what is required in B1 for each method.
Indirect Method
In order to use the Indirect Method, you will need to create a Financial Report Template. While this task is a bit tedious to set up, once it is complete, you will have an instant report available for use. To find out how to set up the a Indirect Method template, check out our video below.
Direct Method
The indirect cash flow statement report is already available out of the box in SAP Business One. However, you must take some steps to configure your accounts for the report. Basically, it involves the following steps:
- Set Default Primary Form Cash Flow Lint Item in the Cash Flow tab of the General settings. You can also make the assignment of Cash Flow line item mandatory.
- Next, mark appropriate accounts as “Cash Flow Relevant” and then in the detail screen of the Chart of Accounts, assign the appropriate category.
- Under Setup for Financials, define cash flow line items.
- On any relevant transaction, assign the cash flow line item.
You may run the “Cash Flow Reference Report” to review cash flow transactions. You can now run the Statement of Cash Flow.