Cash Requirements Projection Report

Application Overview

 When you enter a purchase order line item you specify, by means of the request date, when you would like to receive the item.  If the vendor cannot deliver by the request date but offers a later delivery date, you may enter this date as the line item's promise date (unless you wish to cancel the order).  At some point you will receive all or part of the ordered quantity and the vendor will bill you for the merchan­dise.  Once you have billed you know what your cash requirement is.

It is possible to project your cash requirements before you are billed, however. Such projections are based upon the expected receipt dates for the items you have ordered and the expected costs of these items. To be totally comprehensive, the projection should also take into account unpaid invoices on file in the Accounts Payable package. Such invoices are actually known cash requirements but they are not all due at the same time so you can project when the actual cash outflow will occur.

This application accomplishes such a projection. It derives the cash requirements data from the purchase order line items and from the Accounts Payable Open Item file.

How The Report Is Structured

 This report first lists the cash requirements for a vendor that are derived from purchase order line items. These line items may have receivings posted against them.  They may even be partially billed.  The cash requirement for each line item is simply the unbilled portion of that line item's scheduled receiving.  The cash requirement date is the due date of the anticipated invoice, with the assumption being that the invoice will be dated as of the scheduled receipt date.

 The report next provides a summary of projected cash requirements from purchase orders for the vendor. This summary categorizes cash require­ments by their age.  Below this summary, the report shows the cash requirements that are derived from Accounts Payable data.  Those line items that have been billed, but not yet paid, are included in this section of the report.  They are summarized in categories based upon their age, just as items were categorized.  Note that these totals include payables from non‑purchase order sources such as expense billings.  They also include any recurring vouchers that have not yet been posted to the A/P Open Item file.

 Finally, there is a summary of the vendor's total cash requirements from both sources.  This summary is also categorized by the age of the cash requirements that are included.

 At the end of the report there are three additional summaries of aged cash requirements.  These are the total cash requirements from purchase orders, the total cash requirements from Accounts Payable and the total cash requirements.  These summaries are for the entire company and include all of the cash requirements listed above for individual vendors.

Defining The Aging Categories

 For each report that you print you will be required to define the categories that are used to age the projected cash requirements.  For purchase of this report, aging is simply the means used to determine during which of four periods a cash requirement will fall due.  You define the aging periods before the report is printed.

 In order to define an aging period you must enter the period's ending date and provide a brief description of the period.  You need to define four such periods. The first period includes all cash requirements from the earliest that are on file to those dated as of the period ending date that you enter. The period description that you choose will be determined by the significance of the ending date. It might say Current, for instance; or Before April; or As Of XX/XX/XX; where XX/XX/XX is the period ending date.  You are free to label this category as you see it.  You next enter the second period's ending date and its description.  This category includes all cash requirements whose due dates come after the first period's ending date and fall on or before the second period's ending date.  Again, whatever description you enter is determined by the significance of the date.

 Following this you enter the ending dates and descriptions of the last two periods. Cash requirements that are dated past the fourth period's ending date are ignored by the report.

Evaluating The Report

 The report shows the projected cash requirements for each vendor before showing the company's total projected cash requirements.  The cash requirements derived from the purchase order data are less likely to be accurate than those derived from the Accounts Payable data. For this reason you are given the option of itemizing the purchase order lines from which cash requirements are derived.  Seeing the purchase order line data can help you determine how reliable the projection for a particular vendor is. Purchase order lines are listed in order by their cash requirement date.

 For each line item that prints, the report indicates whether the projection is based upon an actual receiving or merely an expected receiving. Projections based upon actual receivings are more reliable than those based upon expected receivings since the expected receiving may arrive late or it may only be partially shipped or it may be canceled. For each cash requirement date, actual receivings are grouped together on the report above the group of expected receivings to further assist you in differentiating between them.

 You may wish to de‑emphasize the cash requirements from purchase orders somewhat in order to compensate for the inherent unreliability of the data. The cash requirements from the Accounts Payable is accurate, however, since it is based upon actual invoices in‑house with known due dates.  Even though there is a certain degree of inaccuracy in such projections, by including the expected receivings against purchase orders on the report you have a much larger window through which you can view your financial commitments than you would have if you only considered your Accounts Payable. This report can help you spot a tight financial situation far enough in advance to be able to do some­thing about it, particularly if you use this report in conjunction with projects of cash receipts from sales and other such tools of financial analysis.

Run Instructions

 Select Cash Requirements Projection Report from the pull down P/O Reports window.  The following screen will then be displayed:

    The following options are available:

 To return to the menu bar, press the ESC or F10 key. To leave this application, press X for EXIT when positioned at the menu bar.

Entry Field Descriptions

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Cash Requirements Projection Entry Screen

REPORTS