Planit:Detailed Cash Flow

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In this Video you will Learn...
How can I enter more information about my client's income and expenses, to help them better manage their cash flow?
• Detailed cash flow not required
• Options in amount of data entry
• Overview of field types

Keep on Track! Continue training on...
Life Planning Integrated Planning
Cash Flow Management Screen

Other Related Topics
Summary Cash Flow (Canada) Summary Cash Flow (Malaysia) Introduction to the Cash Flow Management Screen
Retired Clients EPF Contributions Cash Flow Statement


The material in this video may differ somewhat from what you see on your site due to difference in version, jurisdiction, corporate content or access level. Regardless of these differences most of the core functions are consistent across all sites, so you'll be able to benefit by and large from what you learn in this video.


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How do I use the detailed Cash Flow in Planit?

We are going to focus on looking at the basic functions of the detailed cash flow screen, see what the implications are for clients who are not yet retired and also see the impact for retired clients.

First of all, the detailed cash flow screen is accessed from the Summary Cash Flow screen by using the Detailed Cash Flow button as seen here.

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When you click into the Detailed Cash Flow screen, you’ll see what we call the “Collapsed” view, meaning that you only see main income and expense categories.

When it comes to income categories, we have:

  • Employment Income
  • Pension Income
  • Investment Income and
  • Miscellaneous Income

And for the expenses, it’s broken down into

  • Source Deductions
  • Family and Living
  • Transportation
  • Accommodation
  • Personal Expenditures
  • Savings and Reinvestment
  • And Miscellaneous

And lastly we have a category that relates to taxes.

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To look deeper at each category of income or expense you can use the “Expand” button which is the + sign on the blue header. This will expand all categories so you can do your detailed entries. You’ll also notice a Plus sign beside each category. When you click on these plus signs, you can expand the screen one category at a time. When the screen or a category is displayed in the expanded view, you can go back to the collapsed view by clicking on the “Minus” sign beside any expanded category or when the whole screen is expanded, you can collapse the whole screen all at once using the Minus sign on the blue header.

When the whole screen is expanded, you can see that it’s very detailed. You’ll also see that for some items there is a data entry field for the client and the spouse and in other cases, the entry field is only under the Client, meaning it’s treating these items as joint expenses. Items that have specific entry fields for the client and the spouse are generally items that have tax ramifications and thus it’s important know who the item belongs to.

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Just because there are dozens of detailed expense fields available, it doesn’t mean that you have to use them all. You can enter detailed income information and then just enter the client’s living expense as one number under miscellaneous expenses. This gives you the ability to capture more granular information on your client’s income, savings and taxes, but doesn’t force you to do detailed budgeting for clients where it’s not necessary. You can decide on a client by client basis how far to go with the detailed breakdown of expenses. And you always have the option to simply use the summary cash flow screen and not use Detailed Cash Flow except where you want more granularity.

Detailed Cash Flow Screen Relative to Investment Income

You’ll notice at the top of the screen, there is a check box where you can identify if the client’s investment income should be reinvested or not. When you check off this box, you’ll see here what happens. It allows you to enter in any investment income, such as interest, dividends or capital gains, so that your tax calculation will recognize these taxable events, but down under the Savings and Reinvestment area, it will pull that investment income back out of the client’s cash flow so that it doesn’t assume that this investment income is spent. This allows you to make your current lifestyle that’s calculated based on income and expenses to recognize the taxation on investment income as an expense, but doesn’t artificially increase the client’s living expenses the investment income after tax.

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Tax Analysis

Here you see a view of the Tax category expanded out. The red arrow identifies the taxes payable based on the client’s jurisdiction, meaning their country/province of residence. The blue area identifies any taxes the client has paid through source deductions or remittances. This is a number you enter if you know what the client has paid. And the green arrow identifies if the client should expect to get a refund or have a balance due for the year.

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Below the Balance Due or Refund Expected line, you’ll notice that there is a sub total called System Deductions that’s not editable. This is a total of all cash flow items you entered in the detailed cash flow screen categories that were tax deductible items. Things line CPP Contributions, Employment Insurance Contributions etc. Then below that section you’ll see highlighted in blue 4 fields that give you the opportunity to enter any other deductions that you want to include, but that were not captured in the detailed cash flow above. That might be some portion of your living expenses that are tax deductible such as business expense, car expenses etc.

Below you will see a view of the Source Deductions category expanded out. The Red arrows highlight an example of some expense items with an asterisk “*” beside them because they will be treated as tax deductible. You’ll also notice when an item has special tax treatment, a field is available for both the client and the spouse since you want to recognize to whom the tax benefit applies. When you combine the deductible categories in the detailed expense area with the additional fields in the tax area, you can get to the point that you have a very accurate projection of tax for your client. Now let’s see how these tax deductions are used when doing long term planning.

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Tax Deduction Flow Through to Long Term

Here you can see circled in red the system deductions that were identified from the entries on the detailed cash flow screen and we have also entered an additional $1,000 of deductions for the client. Then you’ll notice highlighted in blue how these deductions are passed back to the Summary Cash Flow screen after you save the detailed cash flow.

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And then finally you’ll see, circled in purple how two records have been automatically created for these deductions on the Pensions and Other Revenues screen so that these deductions are recognized also in the long term calculations of tax.


Detailed Cash Flow Graph

Another thing on the detailed cash flow screen is a button that says “Graph”. This allows you to view the client’s cash flow graphically by category.

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Cash Flow Treatment – Working Clients

It’s always important to recognize that a client’s money can only go so many places. They can save it, pay it in taxes or spend it. That’s about it. When we do summary level cash flow, we use that simple but true reality to identify a client’s current lifestyle, or living expenses. However, when we move into the world of detailed cash flow, we have an issue that comes up time and time again. That being the fact that client’s rarely know where they are spending their money. They invariable, when documenting expenses, will end up with a large surplus or even a shortfall, that typically is not reality. The client just doesn’t know where they spend their money. It’s much easier to ask a client what they save than to ask them what they spend, since they usually know what they save to a higher degree of accuracy than knowing what they spend. And when you take that issue of surplus or shortfalls in the client’s cash flow and try to do long term planning. It becomes very problematic. You can’t assume an inaccurate surplus or shortfall is real as it will distort the projections. It’s for this reason that we approach the identification of the client’s current lifestyle using the Total Income Minus Taxes Minus Savings approach. What this means is that if the cash flow says the client has a surplus, we take it and move the surplus into a non editable field called “Unallocated Expenses” as you can see here on the screen. This brings the cash flow deficit to zero.

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When a shortfall is identified, we do allow this to be displayed on the screen and in the cash flow report that is incorporated in to various documents. BUT, when we identify the Current Lifestyle or family expense number for the client, we reduce the expense number to back out the deficit that’s been identified so that we don’t’ assume a client in their working years is encroaching on their savings every year. So, the end result is that working client’s will always have living expenses that’s calculated by taking total income, minus taxes, minus savings and that equals their current lifestyle or family living expenses.

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Cash Flow Treatment – Retired Clients

When you have retired clients their situation is somewhat different since they are moving into the capital depletion mode and it is quite conceivable that they will have cash flow shortfalls and have to encroach on their capital to fill any gaps. They also may indeed be receiving more income than they need to live on due to minimum RRSP withdrawals and investment income receipts. In situations where a retired client has a surplus identified on the cash flow screen, this surplus will be accepted as accurate and the summary cash flow screen will display this surplus. You’ll notice some special warnings that appear on the summary cash flow screen after you exit the detailed cash flow. It will tell you that you have a surplus that this means that the client has excess funds which will be added to investment capital.

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When there is a shortfall, once again this will be accepted and will merely identify for the client that they have less money than they need to fund their living expenses and thus capital withdrawals will be needed to fund the shortfall. Again, a warning is displayed advising you of the deficit and that it means that capital must be used to fill the gap.