How the check works
Francis subtracts the ending balance on the cash asset line item (mapped to your GL) from the ending cash on the cash flow statement:Check fails for actuals months
Work through these steps in order. The earlier steps catch structural errors; the later steps catch journal-entry-level issues.P&L and balance sheet prerequisites
1
Check GL account mappings
Have all P&L and balance sheet accounts been mapped? The cash flow statement depends on these mappings.
2
Check for manual overrides
Are there manual overrides in the P&L or balance sheet that cause values to diverge from your accounting system source of truth?
3
Check P&L subtotals
Are the P&L subtotals set up correctly, producing an accurate net profit line? This line feeds directly into the cash flow statement.Usual suspects:
- A new group isn’t in the subtotal. A group was added to the P&L but the subtotal formulas above it were never extended to include it, so net profit is missing those rows.
4
Resolve the BS check first
Is the balance sheet check passing? Resolve that first.
5
Check for non-GL line items
Does the P&L or balance sheet contain line items with values not sourced from your accounting system?Usual suspects:
- A broken helper sheet. A helper sheet adjusts the ERP numbers before they land in the P&L or balance sheet, and its formulas don’t reconcile back to the source.
Cash flow statement line items
1
Confirm all cash movements are included
Are all line items that represent cash movements included in the cash flow statement?
2
Confirm non-cash items are excluded
Are all non-cash line items excluded? Common items incorrectly included:
- Depreciation (P&L) and accumulated depreciation (contra-asset)
- Income from subsidiaries (P&L) and investment in subsidiaries (asset)
3
Check multi-currency adjustments
If you use multiple currencies, have you made the relevant adjustments? See the Currency integration.
Cash flow statement formulas
1
Check for missing formulas
Are any formulas missing? Check for cells that are blank where a formula should be.
2
Check signs
Are the signs correct? Asset formulas need a minus sign; liability and equity formulas need a plus sign. An increase in liabilities or equity means you’ve gained or kept liquidity. An increase in assets means you’ve tied up liquidity.
3
Check balance sheet movement deltas
Are balance sheet movement deltas set up correctly (this period minus previous period)?
Journal entries
1
Check for cash journals in non-cash lines
Have any cash journal entries been posted to non-cash line items, causing them to be excluded from the cash flow statement? Look for journal entry descriptions that suggest cash activity: invoice allocation, expense. In each case the bank leg moves cash, but the other leg lands on a line item the cash flow statement excludes, so the movement never shows up.Usual suspects:
- Cash expense booked to depreciation. Debit a P&L depreciation line item, credit bank. Cash drops, the cash flow statement doesn’t show the outflow.
- Dividend received from a subsidiary. Debit bank, credit investment in subsidiaries. Cash rises, the cash flow statement doesn’t show the inflow.
- Dividend paid out. Debit retained earnings, credit bank. Cash drops, but retained earnings movement is excluded from the cash flow statement because it’s assumed to be net profit.
2
Check for non-cash journals in cash lines
Have any non-cash journal entries been posted to cash line items, causing them to be incorrectly included? Look for descriptions that indicate non-cash activity: depreciation, subsidiary, adjustment entry. These are pure accounting adjustments, but one leg lands on a line item the cash flow statement includes, so it reports a movement that never touched the bank.Usual suspects:
- Write-off of fully depreciated assets. Credit the CAPEX asset account, debit accumulated depreciation. No cash moves, but the CAPEX side is included, so the cash flow statement shows an inflow that didn’t happen.
- Depreciation credited straight to CAPEX. Debit the P&L depreciation expense, credit the CAPEX account instead of a separate accumulated depreciation account. CAPEX is included in the cash flow statement, so every month’s depreciation reads as a fixed asset movement.
If the check is off in only one or a few months rather than consistently, the issue is likely a specific journal entry rather than a structural error.