CASH COMMITMENTS – An Overview
The Cash Commitments module is designed to help you manage your budgeted incomes and expenses.
It does this by allowing you to see how your spending, income and electronic transfers will affect the balances of your linked bank and credit card accounts at different points in time.
You can use it to decide what you must pay, what you can defer, how best to pay off your credit card statements and how to transfer funds between accounts.
Properly used, it will ensure you always have efficient levels of funds in all accounts and minimise the risk of bank fees due to low or overdrawn funds.
The Cash Commitments module takes the latest balance for each account and uses this as the starting point for calculating the budgeted cash flow for each account. Based on these calculations it then determines what transfers are needed between accounts – and it keeps repeating the calculation until all balances are within your desired limits.
Before using you must enter a budget. The Cash Commitments module can then help you to determine if you budget is accurate. You should carefully check before relying on the results…
You may also wish to read the following additional details:
CASH COMMITMENTS – Grouping
You start using Cash Commitments by deciding how you will group your accounts, and how you will transfer funds between them.
Select the Groupings tab.
A typical situation for a household is to have several credit and debit cards, plus one or more transaction accounts. Often there is also an investment account that offers a higher interest rate than transaction accounts.
A typical layout is shown as follows:
To change the hierarchy simply drag the accounts to where you want them. You can do this at any time, and all balances and suggested transfers will automatically recalculate.
Bank accounts can have both a high and low alarm limits.
In the example above, the transaction accounts will receive funds from the investment account if their balance over the next week will fall below the low (safe) limit.
If the account balance is expected to exceed the high alarm limit (and won’t go below the safe limit in the next week) any excess funds will be transferred back to the investment account (where they will earn more money).
Credit card accounts only have one alarm limit.
This is a high alarm limit (also marked as ‘alarm at’). This alarm will prevent you from exceeding your specified balance, but only if you have enabled weekly transfers for this account (discussed later).
Note that the credit card balances shown only include budgeted transactions – you must allow an adequate margin of safety between your card limit and your alarm (safe) limit.
To ensure that these balances are as accurate as possible be sure to keep your transactions up to date by recording one-off purchases in the Account Detail section as One-off bills OR ensure you frequently import and categorise account details.
Read Management of Credit Cards for more details.
Only active bank and credit card accounts are available for grouping. Loans are excluded from the list of accounts used to consider cash flow and suggested transfers. This does not mean that loan payments are not considered – only that you cannot use them as a source of instant cash (unlike bank and credit card accounts). A similar restriction applies to Other Asset & Other Liability accounts.
Read How to include Loan and Interest Payments for more details
To get a clearer idea of how best to set up your accounts refer to our free Special Report: Banking Your Way. Click here to download this report.
CASH COMMITMENTS – Warnings
Cash Commitments requires that certain parameters are properly configured so that it can calculate the suggested transfers between accounts.
Select the Warnings tab to see these critical details.
Click an account name or links to rectify any problems.
As a minimum you must specify:
Safe Balance: For bank accounts this is the minimum level of funds you want in your account. For credit cards it is the maximum budgeted balance (or safe limit) in the account (must be less than card limit)
Closing Date: This is the date of the last imported transaction and the last date entered for the balance. In normal circumstances the entered balance date will be equal to or later than that of the last imported transaction.
“Days old” is determined from the Closing Date. Closing Dates over 14 days old provide a warning (as stale) but do not prevent the calculation of transfers between accounts. A similar warning presents for accounts with uncategorised transactions.
Also for credit cards:
You must specify the normal “Statement calculated on day” and “Days to pay statement”. If either of these is unspecified the Safe balance will have ** after the desired balance (if specified). This information is important for producing accurate calculations.
The normal way to use Budgets Get Real is to import and categorise your transactions, use these to create a budget and then use your budget to determine future cash flow requirements. You can, however, bypass statement import and start by entering a budget and the known balances and balance dates for your accounts.
CASH COMMITMENTS – Account Detail
Account Detail is the primary method by which budgeted transactions are managed.
It provides an alternate method for entering and maintaining budget items as well as recording cheques that will subsequently be presented and recorded in your imported statements.
The main commands are:
Select an Account. Select the account to maintain from the drop down list.
Rectify missing preferences and warnings. Each time the grouping to which the selected account belongs is changed, commitments checks for any unset preferences. If these exist you will be given a list of steps to rectify before any calculations for the account are presented. For accounts with uncategorised transactions or imports more than 14 days old you will be given the option to “Proceed with Caution” – which will only show once per session.
Show Before today. This allows you to see all transactions from the closing date (the date you last entered your Balance) and confirm how the Estimated Balance was calculated to end of yesterday. Normally only the Estimated Balance and future budgeted transactions will show.
Use weekly transfers. This only applies to Credit Card accounts. For these accounts, Cash Commitments can suggest transfers on a weekly basis and/or as a lump sum payment when the statement is due. Disabling this option means that payments are suggested only once per month.
Add one bill. Allows you to enter and confirm a single transaction without needing to create a budget rule to handle this. We suggest you use this method for all but minor deposits/purchases to maintain the accuracy of your budgets between importing & categorising account statements, or resetting account balances.
It is strongly suggested you enter all cheque payments here – there is no time penalty, since you wont have to enter the name and category when these are imported from statements.
Add series. Takes you to the Budgets components view i.e. shows rules for each Category. You can add or update budget rules here. Use this method to access automatic budget transactions without a linking arrow.
Calendar view. Shows activity for 8 weeks from today.
The colour coding reflects the various account limits as follows:
- Days shaded Red mean that the balance is below the safe limit for the account.
- Days shaded Green mean that the balance is above the top limit for the account. This really only applies for bank accounts with an “alarm if above” limit
- Days shaded Yellow indicate some other activity.
Warning panel. Indicates any limitations in your transactions and calculated transfers, and tells you what you must do to rectify these.
In interpreting the calculations the following apply:
Amount & Balance. These represent the value of the budgeted transaction and the balance in the account after it has been deposited / paid. Deposits and accounts in credit are shown in black. Payments and debit balances are shown in red.
Top Balance. This column represents the minimum balance (for the coming week) for the parent account in that group. It is denoted on the start date of the week. Note that the balance may increase / decrease over the week due to income & expenditure.
The value in this column is really useful when working on dependent accounts. This provides a way to see what happens if you overspend at the dependent account level and plan your spending accordingly. I.e. You can choose to delay spending, or not spend as much, from the dependent account if it will prevent overloading the top account.
The Top Balance represents the total wealth at any time for all accounts in the grouping – transfers simply change the individual balances but not the overall total (this depends on your deposits and payments).
Links and symbols. The following links are provided:
Green Arrows: Budget items of that are included as a specific bill or income, and nominated as “Remind + then you pay”. This may also include One-off payments that have yet to be confirmed.
Black Arrows: Un-presented cheques. These can be entered at the transaction register or by confirming a budgeted payment (e.g. that you have paid a bill that you budgeted for). The details entered will automatically categorise that cheque when it is imported – no further entry will be needed. Entering cheques here makes it simple to keep track of un-presented cheques, while keeping your budget as accurate as possible.
Red Arrow: Credit Card Payments due for payment. You have entered the statement details and used the Credit Card calculator to decide on an amount to pay.
Red Dot: Suggested payment from this accounts.
Grey Dot: Suggested deposit to this account
CASH COMMITMENTS – To Do
The To Do List summarises future income and expense payments, from all bank and credit card accounts for the next 8 weeks.
Action Required / Reasons
Displays all future budgeted transactions. Payments (& deposits) that need to be manually paid are referred to as Tasks, and can be identified by an arrow or other symbol before each line. You can decide when and how you make these payments (& deposits), change the amount and date and record the payment method. Other transactions represent your automatically deposited/paid, budgeted transactions.
Actionable tasks are identified by the following symbols:
Green Arrows: Budget items of that are included as a specific bill or income and nominated as “Remind + then you pay”. This may also include One-off payments that have not as yet been confirmed.
Black Arrows: Non presented cheques. These will affect cash flow.
Red Arrow: Credit Card Payments due for payment.
Red Dot: Suggested transfers between accounts. Note that only the payment side of the transfer is suggested in the summary.
To see the details of transfers between accounts simply click on one of the red dots for the desired date. All suggested transfers for that date will show in a pop up window. (As shown below)
Note that while credit cards get their funds from their nominated parent account (See Grouping tab) it is possible not to calculate these transfers on a weekly basis.
In this case the amount is denoted as Stopped.
Summarises the activity as follows:
- Days shaded Yellow represent days with some income / expense effecting cash flow.
- Day numbers shown in bold represent days with a specific task to do.
- The current day is shown boxed.
- Days shown greyed out represent days more than 14 days prior to today.
- Days shaded Red are days where one or more accounts will be below its safe level of funds for the coming week. Clicking on the day will display a popup windo