|Budgets and Cashflows - explaining the difference|
|Information supplied by Calxa |
The difference between a budget and a cash flow forecast can sometimes be confusing in the beginning. They can seem to show similar information yet both are very different and have different uses. Both are essential for the accurate financial management of your organisation.
A budget details what you plan to do with your finances for the relevant period of time.
This is usually over 12 months, and focuses on profit. In addition:
A cash flow forecast details when the actual receipts and payments are likely to occur.
One point worth mentioning is not to assume that debtors will pay the following month. Often it may be later which is why it is important to know your Average Debtor Days which may show that payment occurs typically 64 days after sending out the invoice.
This also highlights the value of knowing some important Key Performance Indicators (KPIs) such as:
This information can be found on the Calxa website, click here