--- title: Plan AR, AP & Inventory description: Plan your sales and expenses and let Reach Reporting automatically project Accounts Receivable, Accounts Payable and Inventory Balance Sheet positions, without the need for complicated formulas on your end. --- [Skip to content](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#main-content) ![Asset 1.png\]](https://knowledge.reachreporting.com/hs-fs/hubfs/Asset%201.png?height=22&name=Asset%201.png) Open main navigation Close main navigation - [Go to reachreporting.com](https://reachreporting.com/) [Go to reachreporting.com](https://reachreporting.com/) How can we help improve your Reach? - There are no suggestions because the search field is empty. 1. [Knowledge Center](https://knowledge.reachreporting.com/?hsLang=en) 2. [Budgets & Forecasts](https://knowledge.reachreporting.com/budgets-forecasts?hsLang=en) 3. [Build Your Projections](https://knowledge.reachreporting.com/budgets-forecasts?hsLang=en#build-your-projections) # Plan AR, AP & Inventory ## Plan your sales and expenses, and Reach projects AR, AP, and inventory balances and their cash flow impact without formulas ### **In this article:** - [Understanding AR and AP](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#understanding-ar-and-ap) - [How the Balance Is Calculated](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#how-the-balance-is-calculated) - [Why the Starting Balance Uses Turnover](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#why-the-starting-balance-uses-turnover) - [Example: $1,000 Sale with a 60-Day Payment Term](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#example-1000-sale-with-a-60-day-payment-term) - [Under 30 Days vs. 30 Days or More](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#under-30-days-vs-30-days-or-more) - [Configuring AR/AP Calculations in Reach Reporting](https://knowledge.reachreporting.com/planning-for-accounts-receivable-accounts-payable-and-inventory-turnover#configuring-arap-calculations-in-reach-reporting) --- ### **Understanding AR and AP** - Accounts Receivable (AR): Money customers owe you for sales you've already invoiced. - Accounts Payable (AP): Money you owe vendors for bills you've already received Both AR and AP can be planned based on the speed of invoice collection or bill payment. --- ### **How the Balance Is Calculated** Each month's balance builds on the one before it: - Existing Balance: The balance carried over from the prior month. - Invoices (AR) or Bills (AP): New activity this month, from the Income and Expense accounts you mapped. - Collected (AR) or Payment (AP): What is collected or paid this month. - New Balance: Existing Balance + Invoices/ Bills – Collected/ Payment. This becomes next month's Existing Balance. | **Where does the Existing Balance start?** | | | --- | --- | | Budget | The prior ending fiscal year | | Forecast | The last month with actuals. When actuals roll forward, they replace the balance as the new starting point | | Multi-Year | Set in advanced settings. It should be a prior-year budget or forecast | --- ### **Why the Starting Balance Uses Turnover** The Reference column shows how much is owed at the start, but not when each invoice or bill was issued. Some may be from last month, some from several months ago. Turnover fills that gap. It is how fast your balance is paid off and replaced, and it comes from your number of days. At 60 days, for example, your balance turns over about 6 times a year. So instead of guessing dates, Reach Reporting treats the starting balance as a mix of invoices (or bills) of every age within your payment term, and settles it evenly over that many days: - At 60 days, half is settled each month, so it is gone in 2 months. - At 30 days or less, all of it is settled in the first month. --- ### **Example: $1,000 Sale with a 60-Day Payment Term** Say you have $1,000 of sales in January and nothing before or after. With a 60-day payment term, the invoice stays unpaid for 2 months, so AR stays at $1,000 until it is collected in March. | | **Jan** | **Feb** | **Mar** | | --- | --- | --- | --- | | Existing Balance | $0 | $1,000 | $1,000 | | + Invoices | $1,000 | $0 | $0 | | − Collected | $0 | $0 | $1,000 | | **New Balance** | **$1,000** | **$1,000** | **$0** | When the invoice is paid, AR decreases by $1,000 and your cash inflow increases by $1,000. AP works the same way with bills, as a cash outflow. --- ### **Under 30 Days vs. 30 Days or More** Activity is spread steadily through each month, so what changes with your number of days is whether any of it is settled before month-end: - 30 days or more: Nothing from this month is due before month-end, so all of it is still open, as in the example above. - Under 30 days: Part of this month's activity comes due within the month, so part of it is collected (or paid) by month-end. Here is the same $1,000 January sale with a 15-day payment term: | | **Jan** | **Feb** | **Mar** | | --- | --- | --- | --- | | Existing Balance | $0 | $500 | $0 | | + Invoices | $1,000 | $0 | $0 | | − Collected | $500 | $500 | $0 | | **New Balance** | **$500** | **$0** | **$0** | Half of January's invoices ($500) are collected within January, and the rest in February. --- ### **Configuring AR/AP Calculations in Reach Reporting** 1. Access Settings: Click the Settings gear icon at the top. ![](https://knowledge.reachreporting.com/hs-fs/hubfs/knowledge-base/ar-ap-planning/ar-ap-planning-1.png?width=605&name=ar-ap-planning-1.png) 1. Enable Calculations: Select the AR or AP calculation you wish to configure and check the "Enable Calculations" box. ![](https://knowledge.reachreporting.com/hs-fs/hubfs/knowledge-base/ar-ap-planning/ar-ap-planning-2.png?width=605&name=ar-ap-planning-2.png) 1. Map Balance Sheet Account: You can select an account directly from your Chart of Accounts. 2. Input Details: Input the percentage of cash sales and the average number of days for collecting invoices or paying bills. 3. Map Profit & Loss Accounts: Choose all Income and Expense accounts from your Chart of Accounts that will contribute to AR/AP calculations on the Balance Sheet and related Cash Flow projections. Once AR/AP calculations are enabled, the corresponding rows on the Balance Sheet are grayed out and locked. Hover over a cell to display the calculation: ![](https://knowledge.reachreporting.com/hs-fs/hubfs/knowledge-base/ar-ap-planning/ar-ap-planning-3.png?width=605&name=ar-ap-planning-3.png) AP shows the same lines, with Bills and Payment in place of Invoices and Collected. --- ### [**Go to the Reach Reporting app\>**](https://app.reachreporting.com/login) ARE YOU NOT CURRENTLY USING REACH REPORTING? [learn more at reachreporting.com](https://reachreporting.com/) ### **We are dedicated to helping you.** \- Need Additional Help? *Your success is important to us.* Whether you're working as a CFO of a business or part of an accounting firm, Reach Reporting is here to improve your working knowledge of reporting and provide service tips and skills to ensure you're at the top of your game.  We make sure that you have access to staff members who are best suited to help you. We work together to resolve issues and create memorable moments that empower you to enhance your reporting skills. 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