How to use FreeAgent's Cashflow feature

This article explains how to use FreeAgent’s Cashflow feature, which provides insight into your business’s near-term financial health.

How FreeAgent’s Cashflow feature works

FreeAgent’s Cashflow feature calculates the money coming in and going out of your business across a 90-day window to provide a measure of business health and to show you a projected future balance. The Cashflow feature uses the following data from your FreeAgent account in order to perform the calculation:

• The total balance of all your bank accounts in FreeAgent, including loan accounts (you can exclude certain bank accounts from the calculation)
• Future-dated bank transactions
• Due, overdue and partially paid invoices, bills and credit notes
• Recurring bills
• PAYE and employer’s National Insurance payments due (FreeAgent takes this information from your payslip data)
• VAT return and Corporation Tax return liabilities as recorded in your Tax Timeline (journal adjustments for Corporation Tax won’t be taken into account)

In addition, the calculation takes into account any active recurring invoices that are due to be created and paid in the next 90 days. FreeAgent will use the net amount for these items in your Cashflow calculation in the first instance. Once the invoice has been created and either sent automatically or marked as sent, the calculation will then include the actual invoice amount instead.

The calculation also takes salary payments into account, as long as you explain one bank transaction as ‘Money Paid to User > Net Salary and Bonuses’ for each employee after 3rd December 2020.

The Cashflow feature only takes transactions and bank account balances that are in your base FreeAgent currency into account. If you have a UK account, your base currency will be GBP. If you have a US FreeAgent account, it will be US dollars and if you have a Universal account, it will be the currency you selected when you first set up your FreeAgent account.

The cashflow panel on your Overview screen is different to the Cashflow feature. The cashflow panel on the Overview screen shows the money coming in and going out of your business over different periods of time. It displays the difference between cash coming in and cash going out over the last 12, six or three months, depending on the time period you choose from the drop-down menu in the top-right hand of the panel.

The graph doesn’t include due or overdue invoices and the balance you see on the Overview screen only takes historical transactions into account .

Using the Cashflow feature

Navigating to the Cashflow area

The Cashflow feature is available to FreeAgent users with a user access level of 7 or above. To access the Cashflow area of your FreeAgent account, navigate to the ‘Banking’ tab at the top of the screen and select ‘Cashflow’ from the drop-down menu.

The Cashflow area displays a range of data based on the transactions in your FreeAgent account. The numbers will update automatically each day.

Understanding the data in your Cashflow report

The Cashflow graph

This is a visual representation of your forecasted cashflow over the next 90 days. You can change your view of the graph to show either your balance or your ingoing and outgoing transactions by using the drop-down menu above the information panel.

The information panel to the right of the graph displays amounts for:

• today’s balance (this is the amount of cash that FreeAgent calculates is in your business at today’s date - remember to exclude any bank accounts, including loan accounts, from your Cashflow report if you don’t want them to be included in today’s balance)
• a forecasted incoming amount for the next 90 days
• a forecasted outgoing amount for the next 90 days
• a predicted balance in 90 days’ time

Shortfall prediction

This is the number of days in which FreeAgent forecasts that the total of all your included bank balances will reach £0.

Suggested actions

Some suggested steps to help you manage your business's financial health. FreeAgent suggests these actions based on your business’s forecasted balance and shortfall prediction, as well as the other information in your account.

Incoming

Details of all the incoming payments that FreeAgent expects you to receive in the next 90 days (please note that the feature is set up to expect each overdue invoice payment to arrive on tomorrow's date).

Outgoing

Details of all the outgoing payments that FreeAgent expects you to make in the next 90 days.

Adapting your Cashflow report

You can tailor your Cashflow report by excluding particular bank accounts and certain types of 'events' from it.

Excluding a bank account

To exclude a bank account, such as a loan or ‘dummy’ bank account, from FreeAgent's calculation, select the ‘Settings’ button in the top-right of the Cashflow area.

From the ‘Cashflow Settings’ area, choose the bank account that you’d like to switch off from the ‘Bank Accounts’ list. Set the toggle displayed to the right of the bank account details to ‘Off’.

Once you’ve done this, FreeAgent will exclude the balance of any bank account that you’ve turned off from its calculations and from the sums displayed in your Cashflow report.

Excluding an event

To exclude an event, such as a particular bill or invoice, from your Cashflow report, select the three dots that appear next to the item in either the ‘Incoming’ or ‘Outgoing’ section and select ‘Hide from Cashflow’. Once you’ve done this, FreeAgent will exclude the amount associated with that event from its calculations and from the sums displayed in your Cashflow report.

Please note that the Cashflow feature will include VAT and Corporation Tax liabilities in the outgoing sum it calculates, regardless of whether you’ve paid HMRC. To exclude VAT or Corporation Tax liabilities from the sum after you’ve paid, select the three dots that appear next to the item in the ‘Outgoing’ section and select ‘Hide from Cashflow’.

Exporting your Cashflow report

You can export a list of all the incoming and outgoing events that FreeAgent has included in your Cashflow calculation, along with a running balance.

To do this, navigate to the ‘Export Report’ button in the top-right hand of the screen and select either ‘CSV’ or ‘PDF’ from the drop-down menu, depending on your preferred file format.