Cash Flow Examples
Example Overview & Links
SPW Budgeted income and expenses affect the balance sheet, and thus the cash flow, in a straightforward way. The cash flow impact is based on the default Offset Account and Amortization Schedule associated with the GL account; alternatively, the default can be overridden on the budget line or the SPW line.
Activity such as loan principal payments, prepaid expenses, and deferred revenue may be budgeted, or may affect the balance sheet only. This activity has more complicated impacts on the Projected Balance Sheet and Statement of Projected Cash Flows. The information required for these lines is entered on Global SPWs, on the Cash Flow tab. There’s a specific template for each type of activity. All of these are part of the Martus budget, though some of them affect the budget and others affect the balance sheet only.
For these complex items, it is important to be sure to budget (if necessary) and also select the correct cash flow template. That cash flow template determines the information that you must enter and the impact on the balance sheet. The Cash Flow Templates and their Balance Sheet Impacts are listed here:
| Template | Budgeted? | Balance Sheet Impact |
| Loan Principal Payments | No | One non-amortized line and one amortized line |
| Prepaid Expense Billing & Recognition | Yes | Two amortized lines |
| Prepaid Expense | No | One non-amortized line and one amortized line |
| Deferred Revenue & Recognition | Yes | Two amortized lines |
| Deferred Revenue | No | One non-amortized line and one amortized line |
| Fixed Asset | No | One non-amortized line and one amortized line |
| Fixed Asset (checkbox for Sale) | No | Two non-amortized line and one amortized line |
| Opening a Loan | No | One non-amortized line |
| VAT and Sales Tax | Yes | Two amortized lines |
| Balance Sheet Transfers | No | Two non-amortized lines |
Budget Line:
The default Amortization Schedule will be applied, but a line action can be utilized to override it.
Specific Examples
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Prepaid Expense and Recognition
Budgeted Income and Expense
Expected income is budgeted and affects the Net Gain/Loss line on the Balance Sheet. It also increases an asset account (such as Accounts Receivable) in the month in which it is budgeted, and it is amortized away from that line according to the Amortization Schedule.
Expected expenses are budgeted. They affect the Net Gain/Loss line on the Projected Balance Sheet. They also increase a liability account (such as Accounts Payable) in the month in which they are budgeted, and they are amortized away from that line according to the Amortization Schedule.
Use the Standard Income/Expense template for any SPW line that is budgeted to an income or expense account.
Standard Income/Expense Template:
The default Amortization Schedule will be applied on every budgeted SPW line. You can use the Cash Flow tab to override that if you wish.
Loan Principal Payments
A loan principal payment is not part of the budget, but it does affect the balance sheet. Use the Loan Principal Payment template. The specified values increase a liability account (such as Accounts Payable) in the month in which they are assigned; they are amortized away from that line according to the Amortization Schedule. Additionally, the specified amounts decrease a liability account (Loan Payable) in the month to which they are assigned. For multi-entity configurations, an entity must be provided since these are not budgeted.
Loan Principal Payment Template:
Prepaid Expense and Recognition
To configure prepaid expenses, show when the payments hit accounts payable, and reflect the recognition of the prepaid expense, use the Prepaid Expense and Recognition template.
Prepaid expenses are budgeted and affect the Net Gain/Loss line on the Projected Balance Sheet. An annual total is also provided. These values affect two balance sheet accounts. The total increases an asset account (such as Prepaids), and the budgeted amounts are used to recognize and reduce the Prepaid account in the months in which they are budgeted. The total also increases a liability account (such as Accounts Payable) in a specified month (or months, so that it could be paid out annually, quarterly, or monthly) and is amortized away from that line according to the Amortization Schedule.
The example illustrates an expense that occurs in the first month of the fiscal year. If the expense occurs in a later month, you’d specify the correct starting month, and add another line to the SPW to recognize the carryover expense from the previous year.
Prepaid Expense and Recognition Template
Prepaid Expense Recognition – Carryover from Previous Year
Not all prepaid expenses occur in the first month of your fiscal year. The Standard Income/Expense template is used to enter SPW lines that carry over expenses from the prior fiscal year.
Standard Income/Expense template
Deferred Revenue and Recognition
To configure deferred revenue, show when the payments hit accounts receivable, and reflect the recognition of the deferred revenue, use the Deferred Revenue and Recognition template.
Deferred revenue is budgeted and affects the Net Gain/Loss line on the Projected Balance Sheet. An annual total is also provided. These values affect two balance sheet accounts. The total increases a liability account (such as Deferred Revenue) annually, quarterly, or monthly based on the payment frequency field. The budgeted amounts are used to recognize and reduce the deferred revenue account in the months in which they are budgeted. The total also increases an asset account (such as Accounts Receivable) annually, quarterly, or monthly and is amortized away from that line according to the Amortization Schedule.
Deferred Revenue Template
The example illustrates deferred revenue that occurs in the first month of the fiscal year. If the expense occurs in a later month, you’d specify the correct starting month, and add another line to the SPW to recognize the carryover expense from the previous year.
Fixed Asset Purchase
When a fixed asset is planned to be purchased, that is not budgeted but it still affects the balance sheet. The values entered will increase an asset account (such as Fixed Assets). The payment increases a liability account (such as Accounts Payable) and is amortized away from that account according to the Amortization Schedule (in this example, 90% in the month budgeted, 10% in the following month). The Fixed Asset template is used. For multi-entity configurations, an entity must be provided since fixed asset purchases and sales are not budgeted.
Fixed Asset Purchase Template
This example illustrates a planned purchase where the payment is 90% in the month budgeted and 10% in the next month.
Fixed Asset Sale
When a fixed asset is planned to be sold, it is not budgeted but it still affects the balance sheet. The values entered will decrease an asset account (such as Fixed Assets) and increase a different asset account (such as Accounts Receivable) and is amortized away from that account according to the Amortization Schedule (in this example, 100% in the month budgeted). The Fixed Asset template is used; be sure to check the checkbox to indicate that this is a sale. For multi-entity configurations, an entity must be provided since fixed asset purchases and sales are not budgeted.
Fixed Asset template
This example illustrates a planned sale where the payment is received in full in the month following the sale. The payment received is entered on the Values tab. The Purchase Price and Accumulated Depreciation Balance are entered on the Cash Flow tab. The fixed asset and accumulated depreciation account balances are decreased and increased by these numbers respectively.
If the asset is sold at a gain or loss, a second line must hit the gain/loss P&L account on the budget. This line may be entered on either an SPW or a budget worksheet. Use the Month 0 amortization for this line.
Opening a Loan
A new loan is not budgeted. It increases the liability account for the Loan Payable. The Opening a Loan template is used. This example illustrates a single loan planned for August. For multi-entity configurations, an entity must be provided, since fixed asset purchases and sales are not budgeted.
Opening a New Loan template
Balance Sheet Impact - One Amortized Line
VAT and Sales Tax
To configure income or expense lines that are subject to VAT or Sales Tax, show when the receipts or payments hit the balance sheet, and reflect the accumulation and payment of VAT or sales tax, use the VAT and Sales Tax template.
For income that is subject to VAT or Sales Tax, the expected monthly amounts are budgeted and affect the Net Gain/Loss line on the Projected Balance Sheet. An annual total is provided. The monthly values also increase an asset account (such as Accounts Receivable) in the month in which they are budgeted, and they are amortized away from that line according to the Amortization Schedule. With the VAT and Sales Tax template, a percentage and frequency are also specified. The percentage is used to calculate the amount of tax (which increases the specified VAT Payable account). The amount accrued to the VAT Payable account is amortized to cash according to the frequency.
For expenses subject to VAT or Sales Tax, the expected monthly amounts are budgeted and affect the Net Gain/Loss line on the Projected Balance Sheet. An annual total is provided. The monthly values also increase a liability account (such as Accounts Payable) in the month in which they are budgeted, and they are amortized away from that line according to the Amortization Schedule. With the VAT and Sales Tax template, a percentage and frequency are also specified. The percentage is used to calculate the amount of tax (which increases the specified VAT Receivable account). The amount accrued to the VAT Receivable account is amortized to cash according to the frequency.
If the frequency is monthly, the tax is amortized in the following month. If the frequency is quarterly, the tax is amortized in the month following the end of the quarter (January, April, July, and October). In this way, tax receivable and payable are accumulated throughout the quarter and amortized in the month in which tax filings are due.
VAT or Sales Tax template
Balance Sheet Transfers
To account for transfers between accounts that do not affect the budget, use the Balance Sheet Transfers template.
This template will allow you to choose the source account and target account. The source account will be decreased by the Values tab on your SPW, and the target account will be increased on the same schedule. This template is intended for transfers between bank accounts and transfers between equity accounts. If you select two accounts of a different type in Martus, Martus will warn you when you click Save on the SPW line.
Balance Sheet Transfers
