What does Xero utilize to estimate money coming in for each month?

Xero utilizes the expected date of approved invoices to estimate money coming in for each month because this method relies on the established data from invoicing within the system. By assessing the expected dates tied to approved invoices, Xero can provide a more accurate projection of cash flow, reflecting anticipated payments based on formal agreements with customers. This provides a clear timeline for expected income, allowing businesses to plan their finances effectively.

Using the date paid by customers wouldn't provide an accurate forecast, as it depends on individual payment behaviors rather than the systematic scheduling of invoicing. Relying on the previous month’s earnings could be misleading because it does not consider fluctuations in sales or changes in the invoicing timeline. Analyzing the average invoice amount does not factor in the timing of cash inflows, which is crucial for understanding when money is expected to come in. Thus, focusing on approved invoices allows Xero to forecast cash flow in a structured manner based on when payments are anticipated, rather than on historical payment patterns or averages.