Overview
The Cash Health Check feature in Xenon Connect provides an early warning system for liquidity (cash flow) problems in your business.
The premise of the check ignores any balances owed by your customers and considers whether merely the cash held in your bank accounts is enough to pay your upcoming outgoings, on its own.
Upcoming outgoings are weighted, with more emphasis placed on the importance of being able to pay short-term outgoings (such as supplier bills, staff wages, VAT bills, etc) compared to longer-term outgoings (such as corporation tax bills, bank loans, directors’ loans, etc).
Health Indicator
The overall cash health indicator chart provides you with a percentage indication as to the health of your current cash balance.
A higher percentage figure means that your business is better equipped to withstand short-term cash flow problems.
A lower percentage figure means that the business is currently more susceptible to short-term cash flow issues.
Important: A high cash health indicator percentage does not mean that the business cannot suffer cash flow issues. No software tool can look into the future and provide such assurance.
Recent Cash Movements
The “recent cash movements” section shows whether the actual total combined bank balances have increased or decreased during the current and previous 3 months.
Current Cash Balance – This figure is the sum of all bank balances, at the current date (as per Xero). It relies on all unreconciled bank items being explained and reconciled regularly.
Upcoming Outgoings – Future outgoings (per Xero) are shown in the “Enough cash to pay?…” section. By default, the various balances reflect the current balances on the applicable liability account in Xero.
The general outgoing categories are as follows:
Settings
There are various settings that can be amended to tailor the Cash Health Check further, based upon your own business.
Include? – By default, all future outgoings (liabilities) recorded in Xero are considered when comparing them against the current cash balance. However, you can choose to disregard certain categories of outgoings by disabling the “Included?” toggle for particular categories, as required.
Cash Requirement – An automatic calculation of the total value of each category of liability, taken from Xero.
Override automatic calculation – If you want to override the value for a liability category, you can do so by enabling the “Override?” toggle. For example, if you know that you pay approximately £8,000 in net wages each month, then you could override the value shown (as it will often merely show a value of nil for most of the month if using the liability shown in Xero – assuming that salaries are paid around the same time that the payroll journal is posted).
Select Accounts – Xenon Connect automatically places accounts from the default chart of accounts in Xero into a suitable outgoing category. However, if you have created additional liability account codes, then you are given the ability to choose in which outgoing category the account is placed (just as you can for any other liability accounts).
Note: Liability account codes that have been created in Xero (that do not fall within the default chart of accounts) are placed in the “Loans & Other” outgoing category at the bottom of the list by default.
Also, any liability account codes that have not been assigned to an outgoing category can be assigned to any category using the green + icon. Again, unassigned liability accounts are added to the “Loans & Other” category.
Disregard Bank Account Balances – If there are bank accounts that have been set up in Xero but should not form part of the cash in bank figure for the purposes of the Cash Health Check feature (for example, personal bank accounts), then you can disregard those bank accounts using the “Disregard the following bank accounts from the current cash balance” green + icon on the settings page.
