Back March 18, 2021

Budgeting vs Cash Flow Forecasts

Entrepreneurs and managers use budgets and cash flow forecasts in order to establish the business direction and define the ways in which their objectives will be achieved.

In order to take informed business decisions in the present it’s important to know what to expect from the future. Build a solid budget to set up your next targets and use cash flow forecasts to better understand if and how your business can accomplish its growth goals.


The budget plan is your financial planning tool which contains the direction you want your company to take and the its objectives. More specifically, it is a document with estimations about your next monthly inflows, outflows and overall profitability.

Use a budget to set up your growth strategy and to properly manage all your resources in order to achieve your business goals. Check what are your next planned investments and verify if you’ll have the money to cover everything. Otherwise prioritize the urgent expenditures and try to find new financing sources. 

Take your time and include all your estimated ins and outs for the next period. Organise everything on specific categories so it will be easier for you to have control on your estimated income and associated costs. Calculate your net result for each month and make sure that there are no months where you will not be able to cover all outflows.

Your budget is basically your monthly inflows and outflows target. What will be useful to do is to periodically compare your estimations with your realised transactions (exactly what is in your bank account). This will help you spot any potential problems of your business and will give you enough time to prepare for any cash shortages. 

You can start building your budget in Excel, but we encourage you to do it in ThinkOut so you save time and effort.

Cash flow forecasting

Your cash flow forecasts are the next expected transactions (not estimations) and they anticipate the way in which your goals will be achieved. Therefore, forecasts are more specific and represent more certain operations which you can rely on. An inflow forecast can be, for example, based on an A/R (invoice which is not yet collected) or on a contract that you already signed.

Compared to the budget, cash flow forecasts are usually used for shorter periods of time, are revised more often and can be calculated by using your transaction history. Cash predictions define your near future so they are closely monitored because it may prepare you in advance for a potential cash flow crisis.

What to use for your business?

The budget is your overall perspective about the business goals. The cash flow forecasts is a snapshot about what cash you can rely on in the future. Use it both in order to better understand the financial structure of your company and to take informed business decisions.

Want a simple and less time consuming way to do this? Try ThinkOut for free. Build your budget and add your cash flow forecasts with a couple of clicks. Keep track of your realised numbers which are automatically aggregated from your bank accounts. Stop wasting time and get rid of manual work.

Set up your sales goal for the next trimester and add it in your budget. Complete your financial planning with cash flow forecasts to have an approximate overview of your next expected cash movements. Check your forecasted net result for each month and make sure it’s always above the line, otherwise start finding a solution to increase your cash on hand for that specific period.

Did you like this article? Then you will probably enjoy reading more about how to forecast your cash flow for 2021 or what to be careful to when managing your cash flow in Excel.

Author: Bianca Antohe