Methodology

Fathom calculates the Accounts Receivable and Accounts Payable drawdown in your forecast according to the timing profiles you choose. The timing profile for an account 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 on a Revenue account calculates 60% of Revenue being collected as Cash in the first month, 30% in the second month, and 10% in the third month. Fathom will apply this timing profile to the most recent 3 months of historical data for that revenue account, releasing 10% of that value from 3 months ago, then 30% of the value from 2 months ago, then 60% of the prior month’s value. This incorporates the Cash and AR values from actuals revenue into the Cash and AR amounts on the forecast Balance Sheet.

The chart below shows this timing profile being applied on a Sales account with the forecast starting in January.

Any remaining AR balance from the actuals for that revenue account, that does not line up perfectly with the cash collection profile, would then be part of the AR Residual Drawdown.

Changing the Residual Drawdown Timeline

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.

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