Cash flow

Cash flow

Back   Posted on 9 september 2020 / Updated on 11 september 2020
Reading time 7 minutes

What is Cash Flow and why is it Important

Cash flow is the money that flows in and out of your business. With cash flow statement you can keep track of cash your received (payments, investing activities...) and the cash paid out (VAT, income taxes, dividends...) to make sure you have cash for daily operations, taxes, purchasing inventory, paying employees.

Many businesess focus too much on revenue and not enough on understanding when the actual cash will arrive in their bank account. This is one of the biggest reasons small business fail. Predicting your sales and preparing for paying expenses is crucial. The amount and the timing of payments to and from your business is as important as revenue.

Cash Flow for WHMCS

Although WHMCS provides a wide variety of reports to track your income, there's nothing to track expenses. Moreover income projections are very basic and offer extremely tentative statistics. Starting from version 2.2.132 of Billing Extension, we introduced the very concept of cash flow for WHMCS.

In essence, the module integrates two pages:

  • Addons > Billing Extension > Settings > Cash Flow automatically tracks inflow and outflow of money with daily cron job of WHMCS. Of course you can also manually add entries to record purchases, loans, dividends etc.
  • Reports > More > Cash Flow is where you can find historical cash flow statement that goes from your first invoice up to 5 years into the future. That's plenty of time to make plans!

As for the reporting part, we're going to show some previews. This is the graph that shows cash flow statement from company founding date up to 5 years into the future.

If you scroll down you'll find 3 sections. The first tracks inflow and outflow operations like payments received, transaction fees, refunds, credit notes etc.

Then we have investing section where Billing Extension tracks things like sale/purchase of property and equipment, loans and investment securities.

Last we have financing part that tracks dividends, repayment of loans, buy-back (repurchase of stock), borrowing and issuance of stocks.

Types of Cash Flow Activities

Cash flows are classified as operating, investing and financing activities. Each of these categories has subcategories (more on that later).

Activity AKA Example
Operating Activities Free Cash Flow from Operations (FCFO) Cash generated from sales and paid for operating expenses
Investing Activities Free Flow to the Firm (FCFF) Cash generated from sale of property and paid for investments
Financing Activities Free Cash Flow to Equity (FCFE) Cash generated from stock sales and paid for dividends

Operating Activities

This is the most used category by small-sized enterprises since generally they don't generate much cash for investing and financing activities. Activities have a cycle (one time and recurring every X days, weeks, months or years). Moreover you can define start date and end date (optional). With the above options you can define a cash flow that looks like follows:

  • +400 euro / month from other sources (rental revenue)
  • +10.000 euro one time (initial capital)
  • -60 euro every 2 months (internet and telephone expense)
  • -149 euro / year for operating expenses (Billing Extension license)
  • -150 euro / month from Jan 2020 to Jun 2022 (financing 30 months on server purchase)

For obvious reasons initial capital doesn't support start date and end date. In this case all it takes is defining the fiscal year.

Operation Activities
Category Direction Description
Beginning year cash

1st year starts with zero plus funds added manually (if applicable). Subsequent years start from cash at the end of last year plus funds added manually (if applicable). Here's an example:

  • Company founded in 2019 with a budget of 10.000 euro
  • Beginning year cash for 2019 is 10.000 euro
  • 2019 ends with a net increase of 5.000 euro
  • Beginning year cash for 2020 is 15.000 euro
Customers Subtotal (VAT excl.) of all paid invoices per year taking into account currency rate snapshots. Available for all fiscal years up to current date
Customers (projection)

Projected income (VAT excl.) if all active services, domains, billable items and addons are renewed within the year. Projection starts from current date up to 5 years into the future. Let's suppose today's date is 2020-06-01:

  • No projection for 2019
  • For 2020 the projection starts from 2020-06-01 until the end of the year
  • For subsequent years the module shows the projected income if all services are renewed within that year
Other sources Useful to track payments from other sources not related to WHMCS (eg. rental revenue, equipment)
Inventory purchaes Computers, desks, charis...
General operating and administrative expenses Accounting, suppliers, bills, stationary...
Transaction fees Transaction fees for payment gateways (PayPal, Stripe...). For future years the module assumes that you will pay the same amount of money of the last fiscal year
Refunds and payouts Outcome transactions (ones in tblaccounts)
Credit notes Paid credit notes. Credit notes with outcome transactions count as one (transactions are ignored). This is required because of WHMCS weird calculations
Wage expenses Anything related to paying employees (salary, severance pay...)
Interest Any interest your company has to pay
VAT VAT of all paid invoices per year taking into account currency rate snapshots. Available for all fiscal years up to current date
VAT (projection)

Projected VAT if all active services, domains, billable items and addons are renewed within the year without changes to tax rates and tax configuration. Let's suppose today's date is 2020-06-01:

  • No projection for 2019
  • For 2020 the projection starts from 2020-06-01 until the end of the year
  • For subsequent years the module shows the projected VAT if all services are renewed within that year
Income taxes Income tax depending on income at the end of every year

Investing Activities

Amount of cash flow from operations available for investments after expenses. This is arguably the most important financial indicator of a company value for medium and large-sized enterprises enabling to reinvest in long-term assets (eg. equipment).

We still have cycle, start date, end date with an addition: depreciation. Depreciation allows to divide the cost of an equipment by the number of years in the asset's useful lifespan. For example, the annual depreciation on a computer with a useful life of 5 years and a cost of 1000 euro is 200 euro (1000 / 5).

Investing Activities
Category Direction Description
Sale of property and equipment

Selling old office furniture and computers

Collection of principal on loans Revenue from loans
Sale of investment securities

Selling stocks, bonds, mutual funds or other types of investments you can sell

Purchase of property and equipment Buying new office furniture and computers
Making loans to other entities Borrowing money
Purchase of investment securities Purchasing stocks, bonds, mutual funds or other types of investments you can buy

Financing Activities

Generally speaking this part is used by medium and large-sized enterprises. Here we find cycle, start date and end date.

Financing Activities
Category Direction Description
Issuance of stock

Selling stocks

Borrowing Taking out loans
Repurchase of stock (treasury stock)

Share repurchase or buy-back

Repayment of loans Loan repayments
Dividends Payment of cash dividends

Cash Flow Customization

We understand every business is different and unique in terms of needs. We planned in advance a system that suits the need of every business.

Billing Extension allows to provide detailed descriptions with the WYSIWYG editor of WHMCS for each entry of your cashflow. Moreover for each entry you can upload a maximum of 50 files (64.00 MB each) with the following format: jpeg, jpg, png, gif, bmp, ico, svg, pdf, rtf, txt, xlsx, xls, csv, ods, docx, doc, pptx, ppt, zip, rar.

This is particularly useful for accounting purposes. For example for each of your employees you could attach the employment contract. Same goes for office lease agreement, income taxes etc.

Recurring Flow Logic

Very often in WHMCS we see sloppy reports that provide approximate calculations. Let us give you some examples.

  • Domain registration
  • Registration period 2 years
  • Recurring amount 20 euro

Most developers in WHMCS oversimplify calculations. They divide 20 euro by 2 years and tell you that you're earning 10 euro per year. This is completely false.

  • Product/Service
  • Billing cycle Monthly
  • Recurring amount 10 euro

If the product is due on 1st Jan, we can expect to receive a payment for every month of the year. 10 euro multiplied by 12 months equals 120 euro. So far so good. But what if a product is ordered on 1st Dec? Some developers still use the same logic. They tell you are earning 120 euro while in reality you earned one-twelfth of their what they're reporting.

  • Billable Item
  • Recurring every week
  • Recurring amount 10 euro
  • Recur 10 times from 1st Dec

According to the lazy-way of doing calculations, we divide 365 days by 7 days. Then we multiply 52.14 weeks by 10 euro. In the worst case scenario, the developer ignores both the starting date and the "recur for" and concludes that you're earning 521.42 euro. The truth is you're earning 100 euro over the course of two years.

We know what you're thinking. Can you trust the numbers you see in cash flow statement? We got nothing but good news here. Billing Extension loops through days of years respecting start date, end date and cycles. Calculations are 100% accurate this includes projections.

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