Most companies agree that cash is king. However, in a world of accrual accounting — where revenue and costs are recorded when a service is delivered, rather than when money is transferred — it’s easy to lose track of cash. Moreover, it’s easy to loose track within individual departments. Cash flow tables help departments and project teams understand their cash inflows and outflows to remain solvent.
But what exactly is a cash flow table? And how is it different from a cash flow statement?
Cash Flow Table Definition
A cash flow table is a spreadsheet view of cash inflows and outflows in a project or department that displays the net cash result of the activity at fixed intervals over a period of time. These cash flows are placed adjacent to accrued income and expenses to show cash-to-booking variance. Unlike a cash flow statement, a cash flow table does not concern itself with the company as a whole — only a project or department.
It looks like the below image. As you can see, the period is denoted in the far left column, followed by a cash inflow and a cash out flow column. On their right are the accrued amounts, or booking amounts, that the cash flows follow. In the following white columns, you’ll see the delay for the cash transfer of the accrued amounts. Finally, the net amount of accruals for each month and the net amount of cash flows for each month follow. This table contains all of the relevant information in a cash flow table.
Expense vs Cash Outflow
Before we jump into an example, it’s important to understand the difference between accrued booking and cash booking. We’ve referenced it, but what does it really mean?
In an accrued booking, money is recognized on a company’s books from the moment the company delivers a service — not when the customer transfers the cash. In cash booking, on the other hand, money is recognized when the customer transfers cash to the company. This means there is a difference between accounting numbers and actual cash in the bank.
This difference is the reason why cash flow statements exist, and it’s one reason why project and department leads need to use cash flow tables, rather than depend on accounting numbers.
Why do companies use accrued booking in the first place? In short, they use it to show the performance of their activities, which is more interesting, and more representative of performance, than cash reporting. BUT, cash is critical to operations since you need it to earn it.
A final critical details is that companies only show accrued numbers on a yearly basis. This means teams operate “in the dark” on a monthly basis. As you can imagine, project and department leads need the data on a monthly basis, not a yearly one.
This is why cash flow tables are so important! Department and project leaders need to maintain good cash flow tables to ensure they have enough cash to operate, rather than depend on accounting numbers, which do not show cash flows, and do not report on a monthly basis.
Cash Flow Table Example in Excel
Imagine you run the sales team in a wholesale watch company called Batch Watch and you want to show your cash flows. Here are the facts of the flow:
- You make deals on a monthly basis, but customers rarely pay for the watches up front.
- At the same time, you and your team incur travel fees and significant software costs — but you never pay for it up front.
- This means you have two views for both your income and expenses: accrued and cash.
- Customers pay for your service in a variety of delayed payment periods. Likewise, you pay your suppliers at later dates. You and your customers rarely make regular delayed payments.
- Disclaimer: this is not a typical payment pattern, but it’s useful to learn how a cash flow table works in Excel.
Download my Cash Flow Table Example Here
Here’s a picture of the end result, but you can look at the details and the formulas in the Excel document. As you can see, the two red boxes in the bottom right of the table show that there is a delay of two cash expenses to the 13th month (-5,500 & -4,500), which is out of the scope of this period. However, since we receive all but the last accrued income amount, this creates a slightly higher cash flow than accrued flow.
Cash Flow Table Template
You can adapt this model to any project or department. By replacing the accrued income and accrued expense amounts in the blue columns, you control the input amounts. In addition, you can change the income and expense cash transfer columns (highlighted in white) to match the delays in your project. This will allow you to adjust this model to you needs.
Download my Cash Flow Table Example Here
Cash Flow Table vs Cash Flow Statement
The primary difference between cash flow tables and cash flow statements is scope: cash flow tables track cash flows in projects or departments, whereas cash flow statements track all cash movements in a company. To understand this difference in detail, we need to understand the three types of cash flows a company has:
Operating Activities: operating activities are all of the buying and selling activities a company executes to carry out its business. A cash flow table for a project of department falls into operating activities. For example, a wholesale watch company needs to buy metal and glass to make it’s watches, which are an expense. Moreover, it pays rent and salaries to keep afloat. In addition, it sells watches to generate revenue. These are operating activities because they’re directly linked the daily operations of the companies and don’t involve large purchases that would require a large investment of capital.
Financing Activities: financing activities are all those that involve debt, equity, and dividends. These activities are separate from operational activities because they’re not directly linked to the operations of the company. In our example of the wholesale watch company, financing activities might include the acquisition of a bank loan to fund operational purchases such as metal and glass. They could also include the payments of dividends to shareholders at the end of the fiscal year, or the sale of shares to other investors in order to generate cash for the company.
Investing Activities: investing activities are those that include the sale or purchase of long-term assets. Common examples of investing activities are Property Plants & Equipment (PP&E), or big assets that require large capital allocation and must be depreciated over time. In our example of the wholesale watch company, the purchase of a large machine that cuts and places circular glass in a watch face would be an investing activity. Likewise, the sale of a company car would be an investing activity.
Using these 3 categories as a reference, it’s easy to distinguish cash flow tables from cash flow statements. Tables are concerned only with operating activities, and they only make up a portion of the total operating activities of the company, since other departments and projects contribute to cash inflows and outflows. On the other hand, cash flow statements include cash flows from all three categories.
Cash Flow Diagram vs Cash Flow Table
Similar to cash flow tables, cash flow diagrams show the cash activities of a department or project. The difference is how they represent cash movements. Diagrams are typically easier to follow and understand.
Let’s look at a diagram of the cash flow table used earlier in the article:
As you can see, this view has it’s advantages. It’s easy to understand, shareable, and attractive. It’s much easier to envision what’s happening here than in the cash flow table. At the same time, it has disadvantages. It only shows cash flows, not the difference between cash and accrual amounts. In addition, it doesn’t show the net amount at the end of the period.
As a final remark, these diagrams more often take the form of arrows and labels to show different types of cash flows. If a large up-front purchase is needed for a project, then it might be shown as a separate point at the start of the period. However, in a digital world that clings to pretty visualization, arrows are not attractive, so this Excel-based bar chart is a better choice, thought it cannot communicate all of the details that a table can.
