Wave performs accounting on an accrual-basis. This means that income and expenses in Wave are recorded from the moment an invoice or bill are created, rather than when they are paid. Accrual-basis accounting provides a clear measure of your business’s actual profitability, but it doesn’t always give you a complete picture of the money moving in and out of your business. To give you as many insights into your business performance as possible, we’ve created the all-new Cash Flow Statement.
The Cash Flow Statement shows you the funds moving in and out of your accounts based on the actual date of payment. This means that if you created an invoice on January 1st, but got paid for it on February 1st, then the income from the invoice will be recorded in the in the Cash Flow Statement as a February 1st income. In an accrual-basis report like your Profit & Loss Statement, this income would be recorded on January 1st, the date of the invoice’s creation.
The same principle here applies to the bills that you create in Wave. Any of the expenses for any bills that have been recorded in Wave will appear on the Cash Flow Statement based on the date the bill was actually paid off.
There are a number of insights available to you in the Cash Flow Statement that are unavailable elsewhere in Wave. For instance, your Profit & Loss Statement might tell you that you have a lot of invoice income coming your way if you’ve sent out a number of invoices, but it won’t tell you how many of them have actually been paid. You’ll be able to see the actual cash inflow from these payments as they hit your bank account in the Cash Flow Statement.
When you generate a Cash Flow Statement for a specific period, the first thing you’ll see at the top of the page is the Net Cash Change for the reporting period. This measures your cash inflow (the money you brought in) less your cash outflow (the money you spent) to provide you with an understanding of how much actual cash you brought in after expenditures.
This formula is used to arrive at the totals for the right-hand column of the report which will tell you your cash inflow minus your cash outflow. Clicking on Details will give you an account-by-account breakdown.
The Details view of the Cash Flow Statement is particularly useful if your business is required to report and remit sales tax on a cash basis. To determine the amount that you owe to (or are owed from) the government, scroll down to the Sales Taxes section of the report to reveal your sales tax accounts.
Any taxes that your business owes the government will appear as a positive number, while any taxes that you are owed as a refund will appear as a negative. You can read more about reporting and remitting sales taxes here.
We’ve included our new comparative reporting feature on the Cash Flow Statement so that you can measure the cash flow from two periods side by side. To compare two periods, generate a report as you normally would and select Compare to prior period… Selecting an earlier, comparable date range will generate two sets of cash flow in a single report, showing the Net Cash Change for each as well as the difference between periods. You can read more about comparative reporting here
That’s it! Between the cash-based insights in the Cash Flow Statement and the accrual-based information in the rest of your reports, you can now get an even better idea of your business performance every time you visit the Reports page.