When you enter a loan or other funding into the Financing part of the forecast, you will see it automatically represented in three locations:
- Profit and Loss (P&L) statement
- Balance Sheet
- Cash Flow statement
All of these statements show the total of all loans and obligations you entered; there aren’t specific line items for each loan or payment.
In the Profit and Loss
The Profit and Loss statement will only display the interest that you pay on your loans, not the principal. This is because the interest is the only portion of the loan payment that is expensable charge, meaning it will affect your net profit.
Your total interest can be seen in the line item for Interest Expense. The interest you pay on your outstanding debt in each month will amount to an annual total at the end of the first fiscal year.
Interest is calculated as a percentage of an outstanding debt. This means that any increases in debt will raise the interest expense, and any payments made against the debt will reduce the interest expense.
If you have entered several loans into the forecast, and they have different interest rates, LivePlan will automatically calculate the total of these individual interest expenses. That total is the number you'll see in the Interest Expense line.
In the Balance Sheet
On the Short-Term Debt line of the Balance Sheet, you will see the current cumulative total of your short-term debt. Any new loans you enter into the forecast will increase this total. Any monthly payments you make on the principal will decrease the total.
The amounts shown in the short-term debt line are the portion of your financing that is scheduled to be paid back within the current 12-month period. For an explanation, read What is the difference between short-term debt and long-term debt?
On the Long-Term Debt line of the Balance Sheet, you will see the current cumulative total of your long-term debt. Any new loans you add to the forecast will increase this total, and any monthly payments you make on the principal will decrease the total.
The amounts shown in the long-term debt line are the portion of your financing that is scheduled to be paid back after the current 12-month period. If you enter a loan in your forecast that has terms of more than 12 months, LivePlan will automatically divide it into short-term and long-term amounts.
Interest payments on these debts are not factored into the balance sheet. Instead, interest payments are shown in the Profit and Loss statement (above).
In the Cash Flow statement
Note: The Cash Flow statement is a report of changes, not totals. So in this statement, you'll only see increases and decreases in debt for each period, not total amounts.
The Change in Short-Term Debt line in the Cash Flow statement shows the cash coming in from funding you've received during that period, minus payments you've made. Short-term debt is the portion of financing that will be paid back within the current 12 months. For more on this subject, read What is the difference between short-term and long-term debt?
The Change in Long-Term Debt line shows the cash coming in from funding you've received during that period, minus any payments you've made. Long-term debt is the portion of financing that will be paid back after the current 12-month period.
Interest being paid on the debt is not included on the Cash Flow statement, since it is already factored into your Profit and Loss.
The example above shows you how the changes in short-term and long-term debt are reflected in the cash flow statement. To keep things simple, we'll assume all the loans shown here have 0% interest.
- In the first month, we add a short-term loan of $12,000. This loan will be paid back within 12 months, so it appears as a change in short-term debt only.
- In the second month, we add a new loan: $20,000 that will be paid back in 20 months. LivePlan has converted $11,000 of this loan to short-term debt, since this is the portion that will be paid back in the first 12 months. The remaining $8000 is now long-term debt. So why does that only equal $19,000, if the original loan was $20,000? That's because you have also made a payment on the previous month's short-term loan, and that $1,000 has been subtracted from your short-term debt. That represents a change of ($1,000), which, when added to your new $20,000 loan, becomes $19,000.
- In the third month, we add another loan of $5,000, to be paid back in 12 months. So this is new short-term debt. But it's appearing as an addition of only $4,000 in the cash flow. Why? Because we've also made two new loan payments: one on the Month 1 loan, and one of the Month 2 loan. In this example, each of those payments is $1,000. So this amount is subtracted from both the short-term debt and the long-term debt. Since there was no new long-term debt in Month 3, the payment appears as a change of ($1,000).
As a reminder, these are not cumulative totals, which is why the line is labeled Change in Long-Term Debt. It is simply reflecting the addition (via new funding received) or subtraction (via payments) of debts in your forecast from period to period.
If you look at the Cash Flow statement with annual detail, you will see the total amount of debt that has been added in that fiscal year, compared to the previous fiscal year.