The Importance of Cash-flow

Most clients care about budget versus actuals and favorable or unfavorable variances set at certain thresholds. However, cash is king, and many clients are concerned with cash flow. I deal with a few that have endowments, and the question is, “When do we have to pull our budgeted withdrawal for the year?”

Doing the cash flow analysis weekly or monthly gives insight into burn rates and the cash horizon. Usually, for clients, in addition to budgeting, I produce a 52-week cash flow projection and use actual cash flows as a comparison. Sometimes, having visibility on cash is more helpful than the budget vs. actual analysis, especially for organizations that might be the modified cash basis for internal reporting but accrual-based for year-end, audit, and external stakeholders.