Cash flow software with tax calculation functionality

By Russell Bowyer

Making tax calculations easy in cash flows using cash flow software

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Looking at most of the answers to Google searches for cash flow software with tax calculation, these seem to deal with cash flow modelling and tax software within accounting software. But I don’t think that’s what you were searching for. What I think you are looking for is cash flow software that includes tax calculation functionality. Let’s take a look…

Cash flow software with tax calculation functionality: Cash flow software with tax calculation functionality means it includes tax calculations calculated on projected profits. The calculated tax payment or refund will be shown as an outgoing payment or an income source on the cash flow forecast, with any closing liability or refund debtor on the projected balance sheet.

In addition to reporting tax figures on the cash flow forecast and balance sheet, tax numbers will also be included on the forecast income statement or projected profit and loss.

If I’m right in my opening statement to this article, then you are looking for cash flow software that also deals with tax calculations. Rather than how to create your own spreadsheet template from scratch to deal with tax.

How cash flow software includes tax calculations and functionality

Cash flow software that includes tax calculation functionality, the figures for the tax liability and the payments or refunds will be dealt with as follows in your forecast reports.

In the cash flow period there’s a tax liability, which will be included on the projected balance sheet. This is until such time as the liability is paid and included on the cash flow forecast itself.
If during your forecast period you anticipate a tax refund, and the refund has yet to be repaid, this is included on the balance sheet as a debtor. In the period when this tax refund is repaid, this will appear on the cash flow forecast report.
The tax charge or refund amount will be included in the forecast profit and loss (or income statement).

Cash flow forecasting software functionality requirements for tax calculations

The type of functionality that should be included in cash flow forecasting software includes the following options:

The ability to adjust the forecast profits for each period chargeable to tax. This should include both additions to the forecast profit and deductions from the profit.
Different tax rates for each of the forecast periods.
The ability to deal with tax refunds.
The functionality to deal with forecast losses and the ability to set these off against forecast profits.
Functionality to be able to carry losses forward.
To be able to change the month in which the tax is paid.
A function to set the tax payment frequency to be on a quarterly basis in the cash flow forecast.
Plus the ability to ignore tax altogether and switch the tax calculation function off altogether.

Simple cash flow modelling may not include tax calculations

Simple cash flow modelling will usually only show a projection of the ins and outs of money with the resulting closing cash balance.

The best way to produce a simple cash model is to used spreadsheet software, but if you need more complex cash flow forecasts, cash flow software would be better.

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