If I have a surplus, why don’t I have any money?

It’s probably a timing issue.

You might be strapped for cash if you are paying off bills from past year losses. In the same way, if you’re doing some early spending on future projects, this year’s money might be flying out the door to get ready for next year.

You could also be tight if you haven’t collected all the money people owe you. For instance, maybe you’ve rented a lot of studio time or gathered a lot of event registrations. If those people have booked but not yet paid you could be in trouble. In the same way, you could have solid fundraising pledges, or a confirmed grant, but still be awaiting the funds.

If I have a deficit, how come I’m not broke?

It’s probably a timing issue.

This year’s losses might be floated by money that you made in the past.

Or perhaps next year’s money has started to arrive. This is common for performing arts companies that sell seasons on subscription: in the spring, when next year’s tickets go on sale, money arrives that might make you feel flush, but that actually should be carefully stewarded so it can be used to pay for the next season. In the same way, grant instalments might arrive early.

Perhaps the bank is in good shape despite your losses because you haven’t paid the bills yet. You may know that you’ve lost money, but still be awaiting invoices from suppliers.

Why is my budget different from my cashflow?

budget captures revenues and expenses that “belong” to a certain year. A cashflow shows money flowing into and out of your bank account.

Most revenues are received, and most expenses are spent, during the year to which they belong. However, in the early days of this year, you might still be collecting some of last year’s money (e.g. grant holdbacks and other receivables), and paying some of last year’s bills. In the later days of this year, you might start to receive or spend money in preparation for next season. And you’ll probably find that some of this year’s transactions just can’t be settled till the early days of next year.

Besides these timing issues, cashflow involves tax transactions that are not part of your revenues and expenses. For instance, everywhere in Canada we pay GST or HST (depending on your province) on the purchase of goods and services. Cash flows out to pay the sales tax – but for most organizations it’s partly or fully recoverable. Only the non-recoverable part is an expense.

The budget document doesn’t care about the timing of cash payments: it is based on the idea of accrual accounting, where revenues and expenses are “accrued” to the year where they belong, and the actual exchange of money might happen either earlier or later.

The cashflow document is all about the timing of cash, without respect to which year various things belong.