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Understanding Budgets
The difference between a budget estimation and a cash flow prediction
The difference between a budget estimation and a cash flow prediction

Find out how to use budget estimates along with cash flow forecasts.

Bianca Antohe avatar
Written by Bianca Antohe
Updated over a week ago

Budget estimates and cash flow predictions or forecasts are used to define your business direction.

Build a budget to set your business goals and use your cash flow forecasts to see how you can achieve your objectives.

The budget includes the estimated amounts of income and expenses for a given period and represents how the team wants the company to grow in the future.

Therefore, it helps you to set growth goals for your company and to properly manage the resources you have in order to get where you want. Determine the next investments and see if you have the capital to make them all happen. If not, prioritize according to urgent needs or try to find new sources of funding.

Cash flow forecasts define the company's expectations regarding the next inflows and outflows. If the budget presents the company's objectives for the future, the forecasts anticipate how they will be achieved.

Thus, the forecasts are specific and represent safer operations, on which the entrepreneur can rely. A forecast can be, for example, based on the due date of an invoice or the promise of payment from a customer with whom you have already signed a contract.

Compared to the budget, forecasts are usually set for shorter periods. Because they define the next situation of the company, the forecasts are monitored more often and prepare you in advance for critical cash flow situations.

In ThinkOut you can organize both budget estimates and cash flow forecasts on your custom category structure to make it easier to monitor.

Keep in mind that budget estimates are added for a month while the cash flow forecasts are associated with a specific day in the future.

The budget offers an overview of your financial goals while cash flow forecasts help you to estimate what money you can rely on in the future. Use them together to better understand the financial structure of your company and to make informed business decisions.

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