An introduction to FreeAgent’s Cashflow functionality
This article provides an introduction to FreeAgent’s Cashflow functionality. It explains how the software performs its calculations in order to provide insight into your business’s near-term financial health. To learn more, read our article on how to use FreeAgent’s Cashflow feature.
Please note that this functionality is available to users with level 7 access or above.
FreeAgent calculates the money coming in and going out of your business across a 90-day window to provide a measure of your business’s health and show you a projected future balance.
How FreeAgent performs its cashflow calculations
FreeAgent uses the following data from your account to perform its cashflow calculations:
- The total balance of your bank accounts in FreeAgent (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 pulls 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)
- Predicted costs based on analysis of your monthly spending patterns
- Standing orders (only available via NatWest, Royal Bank of Scotland or Ulster Bank Open Banking bank feeds that have been set up or reconsented after 31st March 2021)
- Manually added events
The calculation also takes any active recurring invoices that are due to be created and paid in the next 90 days into account. In the first instance, FreeAgent will use the net amount for these items in its calculation. Once the invoice has been created and either sent automatically or marked as sent, the actual invoice amount will be taken into account instead.
Please note that the Cashflow functionality will include VAT and Corporation Tax liabilities in the outgoing sum it calculates, regardless of whether you’ve paid HMRC. However, you can customise your Cashflow report to hide events that you don’t want FreeAgent to include in its calculations.
The ‘Cashflow’ panel on your Overview screen
It’s important to note that the ‘Cashflow’ panel on your Overview screen in FreeAgent is different to the software’s Cashflow functionality.
The cashflow panel shows the money coming in and going out of your business over different periods of time. You can choose to display the difference between ingoings and outgoings over the last 12, six or three months, using the drop-down menu in the top-right of the panel.
The graph doesn’t include open or overdue invoices and the balance you see on the ‘Overview’ screen only takes historical transactions which have been explained, into account.