There are always tricky situations that leave you scratching your head on how to get a customer’s year-end analysis balanced when it comes to cash in and cash out. Whether you are using the Schedule F Cash to Accrual Analysis or the Financial Analysis (FINAN) there are some common culprits to track down cash discrepancies in these tools.
Cash Discrepancy Sleuthing
First, if the Schedule F tax form (FINPACK Schedule F analysis input form is available here) is your main data source for income and expenses, remember tax reporting purposes does not always follow cash in and out of the business in a year. This leads to many of the common discrepancies. The FINPACK Knowledge Base has an article that goes into more detail on cash flow sleuthing, but let’s consider five situations coming from the Schedule F tax form.
5 Cash Discrepancy Culprits
- Feeder livestock purchases – This is found on Schedule F line 1b. This is one instance where the tax form attempts to make an accrual adjustment by asking for the cost or basis of the items sold in line 1a. FINPACK will make this adjustment a different way so it needs the cash purchases during the year of all feeder livestock, not just the purchase cost of what was sold that year.
- Patronage dividends – This is found on Schedule F line 3b. Cash dividends should be entered in FINAN. The non-cash portion of patronage dividends is added to the co-op equity on the balance sheet. The Schedule F Cash to Accrual Analysis will handle this entry correctly.
- CCC loans – CCC loans reported under election or taken as income are the issue. CCC loans reported on Schedule F line 5a are being treated as income for tax purposes. FINPACK always treats CCC loans as a loan. This situation has many possible outcomes, so we have a separate article on it.
- Cull income – cull breeding livestock income is not found on the Schedule F, but on Form 4797. Remember the gross sale price of cull livestock needs to be included in your data entry to balance cash receipts.
- Hedging gains or losses – you will want a copy of the 1099-B Proceeds from Broker and Barter Exchange Transactions. The total from Box 8 is entered in the Schedule F Cash to Accrual Analysis under net hedging detail. This is the aggregate profit or loss on contracts. For FINAN, the total from Box 11 is entered. If the net is positive, it is entered as a FINAN hedging withdrawal. If the net is negative, this is entered as a hedging deposit in the FINAN.
Cash flow sleuthing is challenging, but looking for these common situations will help you identify and address where the cash went.