AR / AP Drawdown

Calculating & changing the Accounts Receivable and Accounts Payable residual drawdown in your forecast

Updated over a week ago

Contents


Why is there a drawdown?

The AR/AP residual drawdowns ensure the opening Accounts Receivable and Accounts Payable balances for your default AR and AP accounts eventually impact the Cash amount in your forecast.

Fathom calculates the Accounts Receivable and Accounts Payable drawdowns in your forecast according to the timing profiles you choose. The timing profile for is applied against the historical data to incorporate the AR or AP amounts that will be received as or paid out as Cash in your forecast.

Any remaining AR or AP balance that does not line up with the chosen timing profile will then be included in the residual drawdown.

This means that if the timing profiles in the forecast are an accurate reflection of actual cash payment/collection, the residual drawdown amount should be relatively small.

The residual drawdown will be applied to the default AR and AP accounts on your forecast balance sheet in a straight line over 1-6 months. You can choose how many months to spread out the impact of the drawdown in the ‘Forecast Settings’.

Example

A 3-month timing profile has been chosen for the Revenue classification in a forecast.

Period

% of Revenue Collected as Cash

Same Month as Recorded on P&L

60%

Month 1

30%

Month 2

10%

Fathom will apply the Revenue timing profile to the most recent 3 months of historical data for all Revenue accounts.

The chart below shows this timing profile being applied to a Sales account under the Revenue classification, with the forecast starting in January.

Applying the timing profile to periods before the start of the forecast incorporates the Cash and AR values from historical revenue into the Cash and AR amounts in the forecast.

Forecast Period

Revenue Collected as...

Revenue from

3 Months

Prior to Forecast Start

Revenue from

2 Months

Prior to Forecast Start

Revenue from

1 Month

Prior to Forecast Start

Month 1

Cash

100%

90%

60%

Month 1

AR

0%

10%

40%

Month 2

Cash

100%

100%

90%

Month 2

AR

0%

0%

10%

Month 3

Cash

100%

100%

100%

Month 3

AR

0%

0%

0%

Any remaining AR balance from the actuals for the Revenue accounts that does not line up with the timing profile will make up the AR Residual Drawdown amount.


Changing how the residual drawdown is calculated

You can change how the residual drawdown amount is calculated or applied to your forecast in three ways:


Which timing profile is applied to the historicals?

Timing profiles with a starting period equal to or prior to the start of the forecast start will be used to calculate the AR and AP balances.

If timing profiles applied to the historicals are accurate, the residual drawdown amount should be relatively small.

To view or change the timing profile start date:

  1. Click on the classification, heading, or account name in the forecasting grid.

  2. In the menu on the right, you can view the Rule Timeline.

  3. The timing profiles and their start dates will be listed under Timing Profiles.

  4. To change the start date, hover over the timing profile and select the 'Three dots' icon.

  5. Choose 'Edit existing profile'

  6. Select the bolded start date at the top of the timing profile menu.

  7. Choose a start date prior to the start of the forecast.

    1. The start date you choose should match the length of the timing profile. For example, a 3-month timing profile should have a start date 3 months prior to the start of the forecast.


Changing the Residual Drawdown Timeline

The residual drawdown timeline determines how the residual drawdown amount will be applied to the forecast. You can choose to have the residual drawdown amount incorporated into your forecast over 1-6 months.

To change your residual drawdown timeline:

  1. Go to the ‘Forecast’ tool

  2. Select the ‘Cog/Gear’ icon to open the Forecast Settings.

  3. In the ‘General’ section, click on the bolded drawdown period to change the timeline.


Turning off the residual drawdown

You are able to turn off the residual drawdown. If you do choose to turn it off, then any remaining balance that does not line up with the timing profile will not be incorporated into the forecast. You are able to create journals or schedules to draw down the balance yourself.

To turn off the residual drawdown:

  1. Go to the ‘Forecast’ tool

  2. Select the ‘Cog/Gear’ icon to open the Forecast Settings.

  3. In the ‘General’ section, toggle the residual drawdown on/off. If the toggle is grey, then the drawdown is turned off. You are able to turn the AR and AP drawdowns on/off separately.


Additional knowledge & common questions:

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