A contract with a customer may be large, but its value does not show profit or guarantee that money will be available when a payment is due. A company may pay for materials and team work before receiving payment for a completed stage. To see the difference, record actual receipts and payments by date.
This tracking of money movements is called cash flow accounting. A cash flow statement explains how the cash balance changed during a past period. To check future obligations, add a forecast cash flow or payment calendar with expected dates and amounts.
This guide explains how to read these figures and set up cash flow tracking in project businesses—construction, renovation and services—where there are advances, purchases, accountable funds and payment after a stage is completed.
Contents:
Why track cash flow?
Actual cash flow shows receipts and payments that have already happened and explains the change in the cash balance. To check whether there will be enough money for obligations in the coming weeks, use a forecast cash flow or payment calendar. Separate expected receipts from money already received.
In construction and renovation, payments fall on different dates: a customer pays an advance, a stage and then the final settlement, while materials, delivery, crew work and equipment require payments at other times. Looking only at the contract value leaves the timing of money movements unclear.
For each operation, record the actual date, amount, direction and category. Reconcile the result with bank statements and cash on hand. Use these records together with the income statement and balance sheet, but remember that each report answers a different question.
Cash flow and profit: why the figures differ
Cash flow records money received and paid out. Profit depends on recognized revenue and related expenses under the accounting rules you use. A signed contract and the start of work do not by themselves prove that revenue has been earned or that a project is profitable. A customer advance increases the cash balance, but it does not by itself become earned revenue.
A company may reasonably recognize revenue for a completed stage while the customer pays later. The income statement can show a profit even though the cash has not arrived. In the opposite situation, an advance has arrived, but work and related costs remain. Check both periods and the contract terms.
See the article about the cash flow statement, income statement and balance sheet for the connection between the three reports.
| Report | Question | How to read it |
|---|---|---|
| Cash flow statement | What money came in and went out? | Reconcile actual balance and flows; keep future dates in a forecast |
| Income statement | How do recognized revenue and expenses relate? | Assess the result under your rules, not as the cash balance |
| Balance sheet | What assets, liabilities and equity are shown on the date? | Compare the composition and reporting date |
Cash flow structure: where money comes from and goes
A cash flow statement usually separates operating, investing and financing flows. Define classification rules for management accounting and apply them consistently. A project expense category does not by itself determine the cash flow category.
- Operating flows relate to ordinary work: customer receipts and payments for materials, contractors, rent and services. An ordinary purchase for a new site is operating in its economic substance.
- Investing flows may arise when buying or selling long-term equipment and other long-term assets. Do not classify every start-up cost or tool as investing without checking the purchase.
- Financing flows relate to raising and repaying loan principal and changes in equity. Show interest separately and classify it consistently under applicable rules and your accounting policy.
This grouping explains whether money went to ordinary purchases, long-term equipment or loan repayment. High account turnover by itself does not prove profitability.
How to build a cash flow statement for management accounting
Start with a list of actual receipts and payments: date, amount, category, counterparty and, when needed, project. Reconcile opening and closing balances with the bank and cash on hand for the same period. Mark transfers between your own accounts and accountable employees separately.
Use shared categories. If the same purchase is recorded as “materials”, “purchases” and later by the shop name, the report becomes difficult to compare. Agree on names and use them across projects. See the article about distributing expenses.
Track accountable funds separately. Giving money to an employee and the later payment to a supplier are different stages. Do not count them as two external expenses. Reconcile the advance, documents, final payment and the responsible person’s balance. See the article about accountable funds.
Add a project view: project, category and date help identify which work an operation relates to. The sum of project balances does not replace reconciliation with bank accounts and cash.
Payment calendars and cash gaps
Actual cash flow describes completed transactions. A payment calendar adds future obligations and expected receipts. A cash gap occurs when available money is insufficient on a particular payment date, even when the activity may be profitable on paper.
- Record the actual available balance and reconcile it with the bank and cash.
- Enter payroll, taxes, rent, contractual payments and loan payments with exact due dates.
- Add project payments for materials, contractors, equipment, delivery and stages.
- Enter customer receipts by date and mark which are confirmed.
- Recalculate the balance after every receipt or payment: previous balance plus receipts minus payments. During tense periods, check daily.
- Before a possible shortage, discuss purchasing schedules, customer terms, agreed supplier dates and postponement of non-essential spending. Check legal and contractual due dates.
Example: 100,000 ₽ is available at the start of the week; 120,000 ₽ is due on Monday, and 50,000 ₽ is expected on Friday. The ending balance is 30,000 ₽, but Monday’s interim balance is −20,000 ₽. Checking only the week-end balance would hide the gap. If Friday’s receipt is not confirmed, calculate a delay scenario. See the article about cash gaps in construction.
How to simplify cash flow tracking in the 101 app
In 101, you can record project events, expense categories, settlements with participants and supporting documents. A project balance shows recorded receipts minus expenses; an accountable balance relates to a specific participant. Neither equals the company’s bank balance, project profit or a completed consolidated cash flow statement.
A transfer to a responsible participant is an internal accountable-funds movement. When the participant pays a supplier or contractor, check the separate settlement record. Reconcile events with statements, cash and documents, and do not double-count the external expense.
Read about the cash flow report and about 101 and Finansist. Check available functions and data for your plan, permissions and selected company.
If you want to see the product and discuss project events, book a 101 presentation.
Cash flow mistakes and a short checklist
Inaccuracies come from missing operations, incorrect dates, mixing internal transfers with external payments and inconsistent classification. Check whether personal, company and accountable funds are mixed; expenses are too broad; payments use memory instead of actual dates; or historical cash flow is used as a forecast without future obligations.
- Set shared names for receipt and payment categories; start with 10–15 and refine them.
- Record actual dates and reconcile with primary documents, bank and cash.
- Specify the project and show internal transfers separately.
- Track accountable funds by responsible person without double-counting expenses.
- Build a payment calendar, for example one month ahead, and update it weekly and when dates change.
Once actual and forecast cash flows are in place, discounting may help compare long-term investments. See the article about discounting cash flows.
