Python Programming On Win32

Cash-Flow Analysis

Many accounting systems can’t do a cash-flow report. This sounds shocking, but it’s true. The reason is they store the individual transaction lines, often in a separate table for each account and have lost the transaction itself. The cash flow report records where all the cash came from and where it went to, and is an important tool for managers.

To get a basic cash-flow report, you need to look at the other lines in all the transactions affecting the cash account. If you buy all your supplies with cash, this report breaks down how you spent your money. But if most sales and purchases are on account, the system produces the earth-shattering observation that most of your cash comes from other people paying your bills, and it goes to pay other peoples’ bills. We’ll call this the Brain-Dead Cash-Flow Analysis (BDCFA). A general ledger doesn’t formally store the information needed to trace through the system and see what the bill you just paid was actually for.

This analysis is easy to do, if you tag the transactions with a customer and invoice number. Write a script to find all transactions with a given invoice number, add together the invoice and payment using the magic addition methods, and then perform a BDCFA on that. This lets you trace where cash went through a series of transactions.