ShelbyNext Financials General Ledger: Build a Monthly Statement of Cash Flows (Course #N220)

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1 ShelbyNext Financials General Ledger: Build a Monthly Statement of Cash Flows (Course #N220) Presented by: Mark Fisher Shelby Consultant 2016 Shelby Systems, Inc. Other brand and product names are trademarks or registered trademarks of the respective holders.

2 Objective The objective of this session is to discuss what a Statement of Cash Flows is, how to build a Monthly Statement of Cash Flows, and how this report is run in ShelbyNext Financials (SNF). This session presents the following topics: Statement of Cash Flows defined How a Statement of Cash Flows differs from a Statement of Financial Activities How to build and run a simple Statement of Cash Flows How to use the Statement of Financial Position (Balance Sheet) to compare changes from prior periods and beginning of the year How to use Special Reports to create a Statement of Financial Position (Balance Sheet) to show unrestricted available cash Additional Tips Note: I use the term Balance Sheet in lieu of Statement of Financial Position throughout this handout. 2

3 What is a Statement of Cash Flows? The Statement of Cash Flows is derived from both income statement and balance sheet transactions. If the income statement is prepared under the accrual basis of accounting, the revenues reported may not have been collected they are receivables. Similarly, the expenses reported on the income statement might not have been paid they are payables. The Statement of Cash Flows reports cash both received and disbursed during a specific period of time. This is determined by looking at three components by which cash enters and leaves a church/ministry: operations, investing, and financing. Not all transactions involve actual cash items (e.g. depreciation). Adjustments need to be made because of transactions that determine changes in cash. Changes in accounts receivable??? Changes in pledges receivable??? Changes in fixed assets??? Changes in payables??? Changes in accruals??? Changes in short and long term debt balances??? Things to think about: What do you want the report to look like? Which comes first, Groups or Lines? Sketch it out group by group and line by line. List the account(s) to be included on each line. NOTE: The amount of cash at the beginning of the month or year, plus or minus all revenue and disbursements reported in the Statement of Cash Flows, should equal the ending cash balance that is reported on the Statement of Financial Position at the end of the month or year. 3

4 Options for Building a Statement of Cash Flows (Per GAAP) The statement of cash flows for a nonprofit organization reports the ministry s change in its cash and cash equivalents during a defined accounting period. The statement of cash flows consists of three sections: 1. Operating Activities Any transactions that enter into the determination of the unrestricted net income are classified as operating activities. Cash receipts from: general fund contributions, interest income, activities income from registration fees, rental income, etc. Cash payments for: salaries & benefits, operations, facilities, ministry, interest, etc. 2. Investing Activities Any transactions for the acquisition or disposal of non current assets Cash can be provided by: sale of property or equipment, collection of loans from another entity, etc. Cash can be used to: purchase property, buildings, or equipment; purchase securities; lending cash to another entity; etc. 3. Financing Activities Any transactions involving borrowing from creditors (other than payment of interest) Cash can be provided by: borrowing from short term or long term creditors through line of credit, notes, bonds, mortgages, etc. Cash can be used to retire debt. While the Statement of Cash Flows may be a bit difficult to prepare, it is an important financial statement to be read. Note: For this class I present a simple Statement of Cash Flows that is primarily focused on Operating Activities since that is more applicable to most churches. I do, however, reflect a reduction in loan balances and fixed asset purchases in my example. 4

5 THE FOLLOWING IS A GUIDE FOR YOUR REFERENCE AFTER ISC AND WHEN YOU RETURN TO YOUR MINISTRY. (SIMPLE CASH FLOW) The use of Special Reports is required to create and run a Cash Flow Statement in ShelbyNext. Because the Statement of Cash Flows is heavily dependent upon your chart of accounts, the Cash Flow report is found under Modify > Special Reports. You must design a Cash Flow report before you can run the report. The Cash Flow report is primarily used to print the current balances/activities for each line of the report. When adding or editing a group, you can specify the Description, whether you want to Reverse sign when printing, Show Heading, and where you want to Include Under. This is a drop down list allowing you to select whether to position the group at the top or place it under another group. The option to Reverse sign when printing has a special function when using the Cash Flow report. If this option is not selected, the amount printed on the Cash Flow report is the opening balance. Cash account(s) are selected with the option not selected. If this option is selected, all other accounts that affect the cash balance print amounts for the current period or YTD. When adding or editing a line, you can specify the Description, whether you want to Reverse sign when printing, and where you want to Include Under. After setting up the special report click the Cash Flow report on the right panel under Report(s) Selection. This displays the Preferences window for that report. Make your selections and customizations. 5

6 Statement of Cash Flows 6

7 Statement of Cash Flows Explanation 1. Beginning Cash Balance: This represents the beginning cash balance either for the current period or the beginning of the fiscal year. When creating the lines in the report the key is not to check the reverse sign option. In this example, each bank account is listed separately and with a total. The report builder gives the option to roll all the cash into one line. 2. Budget Net Income: All the budget income is rolled into this one. It would include Tithes/Offerings and other unrestricted income for the church. The budgeted expenses is a roll up of all budget expenses into one line. he net reflects the difference in budgeted income less budgeted expense 3. Designated (Restricted) & Bookstore: This represents the net of all designated income/expense accounts and the net for the bookstore. The flexibility of the special reports allows for the roll up of accounts for your desired output. 4. Change in Liabilities: Each line represents changes in liabilities that represent changes in cash. The order and compiling of each line is up to the user. 5. Changes in Net Assets: This is roll up of all Net Asset accounts which would be direct postings Net Asset or Capital accounts. It would be rare to post directly to these accounts. 6. Other Assets: This section reflects changes in Accounts Receivable (if operating under the accrual method) and fixed asset purchases. 7. Ending Cash Balance: This represents the difference between the Beginning Cash Balance and each section below it. This balance is derived from the Group in the special reports setup. It should match the total cash for the period on the Balance Sheet. 7

8 General Ledger Special Report Basics From the General Ledger menu, select Modify > Special Reports Setup. Modify Special Reports Setup allows you to set up and edit your special reports. 1. Click Filters on the blue bar above the grid if you want to narrow down your displayed reports. 2. Click the Add New Report button above the grid to add a new special report manually. 3. The Auto Generate New Report button allows you to generate a special report automatically. 4. If your chart of accounts is altered, you receive a message above the grid informing you of this fact and prompting you to review your reports to see if you need to make any changes. 5. Click the Report of changes button to bring up a report displaying all changes to the chart of accounts. You can also click the Clear Change Flag link to remove this warning. 8

9 Use Special Reports to Create the Statement of Cash Flows General Ledger > Modify > Special Reports Set Up > Add New Report Notice Ending Cash Balance is the top level Group. Each of the other Groups are nested under Ending Cash Balance. Groups create totals within Special Reports much like Groups within the chart of accounts. Instead of grouping of account number ranges, the special report design allows for lines within each group that can be individual accounts, a range of accounts, or random accounts within the chart of accounts. The lines within a group can cross all funds and departments. 9

10 Ending Cash Balance Group This group is created first and is Included Under position at the top. This is actually the grand total at the bottom of the report. All other groups are nested under this group. Show Heading is not checked because this creates a header at the beginning of the report if checked. Beginning Cash Balance Sub Group and Lines in the Group. 10

11 Group Settings Reverse sign when printing not checked see notes below on this. Show Heading creates a header for the group. Note this group and all the sub groups are nested under Ending Cash Balance. 11

12 Operating Cash Line The critical piece to make the Cash Flow Statement work is the proper use of Reverse sign when printing option. Not checking the Reverse Sign when Printing option causes the report output to reflect the opening Cash Balance. When connecting to the Cash Flow Statement report there are two options: Opening cash balance for the Current Period Opening cash balance for beginning of Fiscal Year. Cash accounts should be the only accounts where this is not checked. In this example, each cash account is listed as a separate line. They could be rolled up into one line if desired. All other Balance Sheet items should have the Reverse sign when printing option checked. This makes the report output reflect the changes in the balance sheet account and print the opening balance. Notice this Operating Cash line is nested under the Group Beginning Cash Balance. 12

13 Budget Net Income Sub Group Budget Net Income lines within the sub group Budget Net Income. Reverse sign when printing should be checked for all items other than Cash accounts/groups. Note this includes Department 10, which is all the budget income for this chart of accounts. Line is nested under the sub group: Budget Net Income 13

14 Budgeted expense lines within the sub group Budget Net Income Notice the table includes each Department within the chart of accounts that includes budgeted line expense line items. Line is nested under the Budget Net Income sub group: Budget Net Income. 14

15 Designated & Bookstore Group and Lines Group Setting Bookstore Line Designated (Restricted Line) All restricted Income and Expense accounts are in Department 100 in this chart of accounts. 15

16 Changes in Liabilities Group and Lines Screenshot from the Outline view Each line is marked with Reverse sign when printing. Each line is a range of liability accounts that represent cash changes for those liability accounts. The Note Principal Payments reflects the amount of cash spent on principal payments for either the period or year to date, depending on which output is used with the Cash Flow Statement. Change in Net Assets Group Normally no direct postings are made to Net Asset accounts. 16

17 Other Asset Group AR Activity This line should be included if you are operating under the accrual method. Fixed Asset Purchases This would be necessary if fixed asset purchases were capitalized when purchased and the fixed asset account is credited when making the purchase. Many churches handle fixed asset purchases in different ways. This is just an example to show the impact on the Cash Flow Statement. 17

18 Link Special Report to the Statement of Cash Flows report Output Choose Cash Flow from the list of Reports. This is where you can select either Current Period or Year to Date option for the Cash Flow Statement output. 18

19 Print Report Setup Select the report from the Special Report Grid and click on View Setup List. 19

20 Results: 20

21 Results: 21

22 Verify with Balance Sheet Balance Sheet with Current YTD and Prior Period This format shows the current YTD, Prior Period, and the difference. Total Cash in the YTD column should equal the Ending Cash Balance on the Statement of Cash Flows report. 22

23 Verify with Balance Sheet Balance Sheet with Current YTD and Beginning of the Year 23

24 Use the Balance Sheet with Special Reports to Determine Available Cash. This format uses Special Reports to roll up accounts and subtract from Cash accounts. This is not a Cash Flow Statement but is extremely helpful in looking at unrestricted (available) cash. 24

25 Special Report Setup for Available Cash Report 25

26 Additional Tips 1. Your chart of accounts is the key to Special Reports. 2. The more consistent your chart of accounts is, the easier it is to design your Cash Flow Report. 3. If your Church has two or more funds it is very important to watch the chart of accounts so that accounts from both funds are included. 4. Think about what you what your report to look like, FIRST. 5. Groups come first. 6. Create a Main Group. 7. Create Sub Groups as needed. 8. Add your Lines under your Sub Groups. 9. Should you separate each fund s Income and Expenses? 10. If you are on Accrual Accounting, be sure you include changes in assets and liability accounts on your report. 11. Link to the Cash Flow report. 12. Cash at the bottom of the report; it is possible. 13. Now GO FOR IT!!!!!!! 26

27 Mark Fisher Shelby Consultant Mark has been a Shelby Independent Trainer since 1998 and currently serves Shelby customers as a Shelby Consultant training in Shelby v.5, Arena, and ShelbyNext. He was previously the Business Administrator at Shandon Baptist Church in Columbia, SC where he gained valuable experience with Shelby software programs. Mark s unique blend of skills and experience allows him to not only tell how the software works, but also helps integrate the software into practical accounting solutions and helps improve customers processes.