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Chapter 2: Cash Flow Management

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CHAPTER 2: CASH FLOW MANAGEMENT

Objectives

The objectives are

Understand the relationship of cash flow to other modules

Set up cash flow forecasting

Define a cash flow forecast budget model

Create cash flow transactions

Calculate cash flow transactions

View online data and print cash flow reports

Introduction

You can use Microsoft DynamicsAX 2009 cash flow forecasting and currencyrequirement tools to estimate a company's future need for cash. To have a reliablecash flow forecast, functionality is available to:

Identify and list all the liquidity accounts, that is the company's cashor cash-equivalent accounts.

Identify and set up the forecasts of transactions that affect thecompany's liquidity accounts.

Calculate, view, and print cash flow forecasts and calculate anddisplay currency requirement.

Control the level of cash flow forecast integration either by selectinga very simple setup for cash flow forecasts or by setting up manyparameters to enable forecasting in many areas.

The cash flow statement is an accounting requirement in some countries and forcertain kinds of companies, such as, publicly traded companies. To build a cashflow statement in Microsoft Dynamics AX 2009, use the financial statementfunctionality. For more information about cash flow statements, refer to theFinancial Statements course in this collection.

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Financials II in Microsoft DynamicsAX 2009

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Relationship of Cash Flow to Other Modules

Cash flow projections are a function of expected cash receipts and disbursements.

Future cash receipts occur because of Accounts Receivable, Sales

orders not yet invoiced, sales budgets, and budgeted and postedledger transactions.

Future cash disbursements occur because of Accounts Payable,Purchase orders not yet invoiced, purchase budgets, and budgetedand posted ledger transactions.

Set Up Cash Flow Forecasting

The ability to accurately forecast cash flow depends on projections of future cashreceipts and disbursements. In Microsoft Dynamics AX 2009, you can set upvarious parameters to calculate the expected dates cash receipts anddisbursements will occur. These calculations are based on posted transactions in

the company.

There are several areas that require setup for cash flow forecasting, including thefollowing:

Liquidity Accounts

Accounts Payable Parameters

Accounts Receivable Parameters

Posting Profiles

Vendor and Customer Groups

Ledger or Budget Accounts Dependent Ledger Accounts

Procedure: Define Liquidity Accounts

Follow these steps to define the liquidity accounts that capture cash receipts andcash disbursements.

1. Click General ledger, click Setup, click Posting, and then clickLiquidity.

2. Press CTRL+Nto create a line for a liquidity account.

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3. In the Ledger accountfield, click the arrowto select a ledgeraccount that is one of the company's cash or cash-equivalentaccounts. In the Namefield, the description of the selected ledgeraccount will display.

FIGURE 2.1 LIQUIDITY FORM

Procedure: Set Up Accounts Payable Parameters

You can use the Accounts payable parameters as default values on vendorrecords when you create transactions that affect cash flow. You can change thesevalues as the actual transaction is recorded.

Follow these steps to define accounts payable parameters related to cash flowforecasting.

1. Click Accounts payable, click Setup, and then click Parameters.

2. Click the Ledger and sales taxtab.

3. In the Cash flow forecastarea, in the Period between delivery andinvoicingfield, use the arrow to select a value that represents thetypical time that it takes vendors to send an invoice for goods orservices received.

During cash flow forecasting, for any orders not yet invoiced, theexpected invoice date calculates based on the receipt date of thepurchase order plus the value in this field.

4. In the Invoicing periodfield, use the arrow to select the value to usein calculating the period between the future date of receipt of goodsor services from vendors and the expected invoicing of the order.

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5. In the Terms of paymentfield, use the arrow to select the mostfrequently used term of payment existing for vendors. You can usethis value for cash flow calculations except when the terms ofpayment are specified on the purchase order, the vendor account, orthe vendor group.

6. In the Settle Periodfield, use the arrow to select the value thatrepresents the expected delay between the due date and the date ofpayment.

7. In the Settle accountfield, use the arrow to select the liquidityaccount that is used most frequently to make payments to vendors.Use this account for settlement unless there is an applicable entry inthe Accounts payable posting profile. This field accesses the Chartof accountstable.

8. In the Allocation keyfield, use the arrow to select the value thatreduces the effect of the budget in the cash-flow forecast as purchaseorders are created.

Procedure: Set Up Accounts Receivable Parameters

The setup in Accounts receivable parameters mirrors the setup in Accountspayable parameters. You can use Accounts receivable parameters as defaultvalues on customer records when you create transactions that affect cash flow.You can change these values as the actual transaction is recorded.

Follow these steps to define accounts receivable parameters related to cash flowforecasting.

1. Click Accounts receivable, click Setup, and then click Parameters.

2. Click the Ledger and sales taxtab.

3. In the Cash flow forecastarea, in the Period between delivery andinvoicingfield, use the arrow to select a value that represents thetypical time it takes your company to send an invoice to customersafter goods or services ship.

During cash flow forecasting, for sales orders not yet invoiced, theexpected invoice date calculates based on the shipment date of thesales order plus the value in this field.

4. In the Invoicing periodfield, use the arrow to select the value to usein calculating the period between the future date ship goods orservices are shipped to customers and the expected invoicing of theorder. This value applies to budget lines, open sales orders, and free

text invoices.

5. In the Terms of paymentfield, use the arrow to select the mostfrequently used term of payment that exists for your customers. Usethis value for cash flow calculations except when the terms ofpayment are specified on the sales order, the customer account, orthe customer group.

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6. In the Settle Periodfield, use the arrow to select the value thatrepresents the predicted delay between the due date and the date ofpayment.

7. In the Settle accountfield, use the arrow to select the liquidityaccount used most frequently to deposit receipts from customers.Use this account for settlement unless there is an applicable entry inthe Accounts receivable posting profile. This field accesses theChart of accountstable.

8. In the Allocation keyfield, use the arrow to select the value thatreduces the effect of the budget in the cash-flow forecast as salesorders are created.

Procedure: Set Up Posting Profiles

You can select the settlement (liquidity) account for each posting profile in bothAccounts Receivable and Accounts Payable.

Follow these steps to select the settlement account.

1. Click Accounts payableor Accounts receivable, click Setup, andthen click Posting profiles.

2. Click the linefor the desired profile.

3. Click the Setuptab.

4. In the Settle accountfield, use the arrow to select an account fromthe Chart of Accounts for payments to vendors (Accounts Payable)or receipts from customers (Accounts Receivable).

FIGURE 2.2 CUSTOMER POSTING PROFILE FORM

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Procedure: Set Up Vendor and Customer Groups

Follow these steps to select both the Terms of payment and the Settle periodper customer or vendor group.

1. Click Accounts payable or Accounts receivable, click Setup, andthen click Vendor groups or Customer groups.

2. In the Terms of payment field, use the arrow to select theappropriate code. If the Terms of payment are specified on the salesorder or purchase order or the customer or vendor, they have higherpriority than the customer group or vendor group terms of payment.

3. In the Settle period, use the arrow to select the code that representsthe predicted delay between the due date and the date of cash receiptor payment. When an entry is made in this field, it overrides anyentry made in the Accounts receivable or Accounts payableparameters for activity associated with the customer or vendor group.

FIGURE 2.3 VENDOR GROUPS FORM

Procedure: Set Up a Ledger Account

The Cash flow forecast form is used to set up ledger accounts that are used incash flow forecasts. In the cash flow forecast, future ledger transactions areestimated based on information that is already posted, such as invoices that arenot yet paid, expected sales tax payments, and budget transactions.

1. Click General ledger, and then click Chart of account details.

2. Select a line for the account.

3. Click the Setupbutton, and then click Cash flow forecast.

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4. In the Percent field, enter 100.00.

5. Leave the Terms of payment field blank.

6. Leave the Posting type field blank.

7. In the Ledger account field, enter the number of the accountselected.

8. Close the Set up cash flow forecasts form.

FIGURE 2.4 SET UP CASH FLOW FORECASTS FORM

Procedure: Set Up Dependent Ledger Accounts

In General ledger, you can set up relationships between accounts so that the cashflow forecast for one account is based on the expected activity in anotheraccount. An example is the calculation of sales tax payments based on theexpected transaction amounts for customer accounts.

Follow these steps to set up dependent ledger accounts.

1. Click General ledger, and then click Chart of account details.

2. Click the line for the appropriate account.


4. If it is necessary, press CTRL+Nto add a line.

5. In the Percentfield, enter the percentage to include in the cash flowforecast.

6. In the Terms of paymentfield, use the arrow to select the terms ofpayment to use in the cash flow forecast.

7. In the Posting typefield, use the arrow to select the posting typerelated to the cash flow forecast.

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8. In the Ledger accountfield, click the arrow to select a ledgeraccount, one of the company's cash or cash-equivalent accounts, towhich the percentage should be recorded.

9. Close the Set up cash flow forecastsform.

10.Close the Chart of accountsform.

You can add more lines in this form if the account selected in the Chart ofAccountsform affects the cash flow of multiple accounts.

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Lab 2.1 - Set Up a Ledger Account for Cash Flow Forecasting

Scenario

Phyllis, the Accounting Manager at Contoso, wants to use the cash flow forecastfunctionality in Microsoft Dynamics AX 2009.

When she reviews the liquidity accounts in the Chart of Accounts, she noticesthat account 110180 is not set up for cash flow forecasting. She wants to includethe activity in account 110180 in cash flow forecasting.

Challenge Yourself!

Help Phyllis change the setup to include the activity in account 110180 in cashflow forecasting.

Step by Step

Follow these steps to change the setup in cash flow forecasting.

1. Click General ledger, and then click Chart of Account Details.

2. Click the line for account 110180.


4. In the Percentfield, enter 100.00.

5. In the Ledger accountfield, enter 110180.


7. Close the Chart of accountsform.

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Lab 2.2 - Set Up a Dependent Ledger Account

Scenario

Phyllis, the Accounting Manager at Contoso, wants to use the cash flow forecast

functionality in Microsoft Dynamics AX 2009.

The bank pays 0.25 percent interest on the 20th of each month to Contoso on thebalance in account 110180. The balance in account 110180 is directly attributedto the activity in account 401120. Phyllis wants to recognize the expected interestin the cash flow forecast.

Challenge Yourself!

Help Phyllis enter the correct setup information in the Chart of Accounts.

Need a Little Help?

Set up account 110180, Petty Cash, as dependent on the expected activity toaccount 401120 using a rate of 0.25 percent.

Step by Step

Follow these steps to setup an account to be dependent on the expected activityof another account.



3. Click the Setupbutton.4. Click the Cash flow forecastoption.

5. In the Percentfield, enter .25.

6. In the Terms of paymentfield, leave the field blank.

7. In the Posting typefield, leave the field blank.

8. In the Ledger accountfield, enter 110180.


10.Close the Chart of accountsform.

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Define a Cash Flow Forecast Budget Model

In Microsoft Dynamics AX 2009, you can link budget models to cash flowforecasts. As soon as a budget is included in cash flow forecasts and budgetentries are made to an account, view the budget entries in the cash flow form for

the General ledger account.

Procedure: Define a Cash Flow Forecast Budget Model

Follow these steps to link a budget model to cash flow forecasts.

1. Click General ledger, click Setup, click Budget, and then clickBudget model.

2. On the Overviewtab, click a line.

3. Click the Generaltab.

4. In the Cash flow forecastsfield, select the field.

5. Close the Budget modelform.

FIGURE 2.5 BUDGET MODEL FORM, GENERAL TAB

Create Cash Flow TransactionsEntries made in Microsoft Dynamics AX 2009 are included in cash flowforecasts based on the system setup. Sales orders, purchase orders, ledger entries,and budget entries are examples of activity that may be included in cash flowforecasts. Entries in various fields including the terms of payment, settle date,and period between delivery and invoicing affect the date the activity displays inthe cash flow forecast.

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Lab 2.3 - Create a Budget Entry to Include in Cash Flow

Scenario

Phyllis, the Accounting Manager at Contoso, wants to use the cash flow forecastfunctionality in Microsoft Dynamics AX 2009. She knows a deposit to account110180 in the amount of $100,000 will be made on 06/20/2009. Phyllis mustinclude that deposit in the cash flow forecast.

Challenge Yourself!

Help Phyllis to create a budget entry using the provided information.

Step by Step

Follow these steps to create a budget entry.

1. Click General ledger, and then click Ledger budget.

2. Press CTRL+Nto add a line to the budget.

3. In the Modelfield, click the arrow to select TOTAL.

4. In the Accountfield, enter 110180.

5. In the Datefield, enter 06/20/2009.

6. In the Amountfield, enter 100000.

7. Click the Setuptab.

8. In the Cash flow forecastfield, note the field is selected.

9. Close the form.

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Calculate Cash Flow Transactions

Setting up cash flow and recording transactions does not guarantee that cash flowforecasts will display throughout the system. You must also calculate cash flow.

Procedure: Calculate Cash Flow Transactions

Follow these steps to calculate cash flow transactions.

1. Click General ledger, click Periodic, click Currency requirement,and then click Calculate cash flow forecasts.

2. In the Calculate cash flow forecastsfield, use the arrow to selectfrom one of the following options:

Total- Clear all existing cash flow forecast transactions andrecalculate.

New- Create a new cash flow forecast, but do not clear other

cash flow forecasts. Select this option to view consequences ofmodifying budgets.

3. Update batch processing options, if it is necessary, and then clickOKto calculate the cash flow forecast. Microsoft Dynamics AX2009 displays an Infolog form when the calculation is completed.

4. Click Closein the Infolog form.

View Online Data and Print Cash Flow Reports

You can view cash flow forecasts from several areas in the system. The

following table summarizes the areas where you can view the data.

Path Action

Accounts receivable >Sales Order Details

Click the Sales order of interest, click theInquiriesbutton, and then click Cash flowforecasts.

Accounts payable >Purchase Order Details

Click the Purchase order of interest, click theInquiriesbutton, and then click Cash flowforecasts.

General ledger >Chartof Account Details

Click the account f interest, click the Inquirybutton, and then click Cash flow forecasts.

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Path Action

General ledger >Ledger budget

Click the budget of interest, and then click theCash flow forecastsbutton.

Inventory management>Item Details

Click the item of interest, click the Forecastingbutton, and then click Purchaseor SalesorInventory forecast.

You can print Cash flow reports when you view the data online. To do this, clickFile, and then click Printor Print previewfrom the menu bar.

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Lab 2.4 - Calculate Cash Flow Transactions

Scenario

Phyllis, the Accounting Manager at Contoso, wants to determine whether thebudget entry recorded is included in the cash flow forecast for account 110180. Ifthe entry is excluded, Phyllis plans to run the calculate cash flow transactionsfunction for the new entries.

Challenge Yourself!

Help Phyllis complete the following:

View the cash flow forecast for account 110180 and look for thebudget entry on 6/20/2009.

If the entry is excluded, run the calculate cash flow transactionsfunction for the new entries.

NOTE: This lab assumes that labs 2.1 and 2.3 have already been completed.

Step by Step

Follow these steps to view the cash flow forecast for account 110180 and lookfor the budget entry on 6/20/2009.



3. Click the Inquirybutton, and then click Cash flow forecasts.

4. Review the activity to determine whether the budget entry for06/20/2009 is included in the forecast.

5. Close the Cash flow forecastsform.


Because the entry was excluded, follow these steps to run the calculate cash flowtransactions function for the new entries.

1. Click General ledger, click Periodic, click Currency requirement,and then click Calculate cash flow forecasts.

2. In the Calculate cash flow forecasts?field, use the arrow to select

New.3. Click OK. When the process is complete, an Infolog appears.

4. Click Closein the Infolog form.

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Review account 110180.



3. Click the Inquirybutton, and then click Cash flow forecasts.

4. Review the activity to determine whether the budget entry for06/20/2009 is included in the forecast.

5. Close the Cash flow forecastsform.


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Summary

This section described the setup and online review of cash flow forecasts usingMicrosoft Dynamics AX 2009.

Users who decide to use the functionality discussed in this section may help theircompany in planning ahead to meet cash requirements.

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Test Your Knowledge

Test your knowledge with the following question.

1. Name five areas in Microsoft Dynamics AX 2009 where you can view cashflow forecasts.

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Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from thischapter

1.

2.

3.

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Solutions

Test Your Knowledge

1. Name five areas in Microsoft Dynamics AX 2009 where you can view cashflow forecasts.

MODEL ANSWER:

Cash flow forecasts can be viewed online from sales orders, purchase orders,the chart of accounts, ledger budgets, and inventory.

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