How are Rollover Adjustments Introduced?
1. Uncategorized Transactions.
Uncategorized transactions do not find their way onto your budget dashboard. They are therefore unaccounted for in your budget. For example, if you forget to categorize your $1,000 Rent payment, your Rent category will perceive a $1,000 favorability on its $1,000 budget. This would create an artificial $1,000 favorable rollover in the following period.
2. Categories no “Rollover To” assigned.
Tiller makes Rollovers optional on a category-by-category basis. If a category’s Rollover To is left blank in the Categories sheet, that category’s favorability is not rolled over once the period ends (i.e. whether favorable or unfavorable, the rollover is lost). When rollovers are disabled for a category, it’s actuals are not captured in the total of category rollovers. For example, the very simple budget below:
If the available amount for all categories were summed (100+100+400), the total rollover would match the net cash flow of $600. But, because there is no Rollover To for the Vacation category, that category will start the subsequent period with ar rollover of $0. In essence, the sum of category rollovers ($200) will diverge from the prior month’s net actuals by $400, the amount of rollover that was lost via an empty Rollover-To.
3. Unbalanced Income & Expense budgets.
Rollovers are derived from subtracting actuals from your budget (shown as “Available” in the current period). If your expense budget is not equal to your income budget, your rollovers will misrepresent savings. For example, imagine an expense budget of $10,000 and an income budget of just $5,000. If during this period, you ran a balanced cash flow of $5,000 for both expense and income, you would see that:
- Your “available” income budget would be $0.
- Your “available” expense budget would be $5,000— which will roll over into the subsequent period
Because net cash flow would be zero (i.e. no savings), the $5,000 of rollover favorability would not represent real-world savings. Rollovers accurate when expense and income budgets are equal.
4. Unbalanced transfer transactions
If you see that your transfers don't equal zero in your current budget period, you'll see a rollover adjustment that reflects the total transfers in the next period as a rollover adjustment.
Transfers should balance to $0. Sometimes a transfer in one month, let's say for a purchase for which you'll be reimbursed by your employer, doesn't balance until a future month. Update the date of one side of the transfer transaction so that they both fall in the same period to balance the transfer.
How are Rollover Adjustments calculated?
Total Rollover = Category Rollovers + Rollover Adjustment
Rollover Adjustment is a correction factor that compensates for the three rollover error contributors above so that total rollovers most closely line up to real-world balances (i.e. net actuals). The Rollover Adjustment is built by summing the following contributors:
- Positive net uncategorized transactions
- Positive category expense budget (categories with a non-blank Rollover-To)
- Negative category income budget (categories with a non-blank Rollover-To)
- Positive categorized income/expense actuals (categories with a blank Rollover-To)