Cash Flow vs Profit and Loss on Dashboard.
jcb
Member Posts: 1
I'm confused, or maybe stupid. Why are the numbers on my 'cash flow' so different to 'Profit and Loss' given I never enter my receipts or billings? The old version of Wave was so much easier to read, just 12 or 24 months of profit. Thanks for any help.
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The way Wave presents this is a little odd. Anyway, I expect the reason is cash vs accrual accounting.
When you make a sale (assuming you invoice it and are paid later), you recognise the revenue but the other side is debtors not cash. When the invoice is paid you reecognise the cash and remove the debtors.
So in p&l you will see whatever you invoiced in the relevant period.
In cash you will see the same number - current debtors + opening debtors (i.e. sales adjusted for change in amounts due to you).
Similar for cost of sales or anything else that isn't paid at the same time p&l is recognised.
Now to the Wave weirdness bit. A cashflow statement is usually a reconciliation between p&l and cash flow. It would start with profit and then have various lines of adjustment showing cash generated in a number of areas. Wave doesn't do that, it shows the direct cash from each bit (not sure how it does this, presumably some background logic of which existing debtors were paid or allocates somehow). I think you can see difference in cash flow report by switching dropdown between cash and equivalents vs accrued for each line item (but I never use it).
Anyway, reason they should largely be different is going to be move in debtors and creditors (or working capital). Other items are financing, capital moves, dividends etc.
@jcb What @thomssi was mentioning is correct! Wave is created to work on the accrual accounting method and so most of the reporting is done on this methodology.
@thomssi The cashflow report in Wave is aimed to show the total change in cash by looking solely at the flow of funds into all accounts and similarly the flow out of all accounts. The difference between the two versions of the report is that one shows only assets and the other includes liability (i.e. credit card) accounts as well.
Thanks @JordanFromWave
I wasn't implying there is anything wrong with the report (just in case), it just doesn't look like one you would see in statutory accounts. The Wave report shows you where cash has come from which is fine, ones in statutory disclosures are more a reconciliation between p&l and cashflow (starts with profit) which would in this instance be useful to @jcb. Still, nothing wrong with it just understanding what it is showing you. Most of it is similar anyway, just the top part that varies the most (cash from operating activities).
@thomssi Ahh gotcha! Curious if you might be able to enlighten me (out of curiosity) about what additional details would be needed on the current Cash Flow Report in Wave to be able to use it in the manner that you described? It would be interesting to see if others were expecting to be able to use the Cash Flow Report as Thomssi is explaining. If you were expecting that type of report, feel free to up vote the post above this one
@JordanFromWave The cashflow would really be petty different. There are usually a few sections and the sections in Wave are actually pretty much the same. You cash changes from doing business (operating activities), raising or borrowing money, buying or selling investments/fixed assets and paying dividends etc. Other than the first one none of them hit p&l so they are pretty much the same.
In most cash flow statements, for the first part, instead of seeing, say, cash from sales (I don't know how Wave does this in the background as this is normally a two step thing, 1 - Cr sales, Dr debtors, 2 - Dr cash credit debtors so there must be some logic to match invoice payments to the sale) you see profit then change in working capital (effectively reversing the accrual change). This is pretty much a direct reconciliation between profit and cash.
To show this, rather than re-arranging the cash flow statement (or having a second presentation) what would be really useful and is a strange omission really is showing a "Compare to prior period" on the balance sheet report and it would have most of the reconciling differences straight away in the current assets/current liabilities changes. It is there for p&l and cashflow..... You could then see change in debtors, creditors etc directly. The other reconciling entries are other accrual changes, depreciation being a key one as it is elsewhere in the balance sheet. In fairness, you CAN see this already in the account balances report but it would still be a good addition to the balance sheet one as I expect far fewer people ever look at the former and, as I said, a little odd it is not there already.
@thomssi I really appreciate you taking the time to explain this. This sort of insight is really helpful when sharing feedback to the Product Team in regards to where we can improve and also how Wavers would like to use Wave. I can't promise any immediate changes but this definitely leaves us with some things to consider.
@JordanD Any possibility to get the P/L Report for the Cash and Cash equ. sales only?
Or we could just get the actual P/L Report, then go in to sales tab and select Cash & Cash Equ. only and get that sales balance to do the manual calculation for exact uptodate P/L?
HI @Singh . The team isn't looking at changing the availability of the reports in the Dashboard at the moment. If you do need this info, head over to the Reports page itself to see it.