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.

Questions About GST/HST? Consider Getting a CRA Ruling.

Staff Post
By Jerry Smith

Have you ever cursed sales tax calculations, or even worried whether a calculation mattered? Have you ever played sales tax roulette – called the help desk at CRA multiple times with the same question until you got an answer you liked?

First, whatever anyone tells you over the phone is – just an opinion! This was confirmed recently when Young Associates hosted two guests from the Canada Revenue Agency GST/HST Rulings Directorate.

If you want a definitive answer, you need a ruling – an official answer that is binding on the CRA, and that responds to the specifics of your situation.

To get a ruling, submit your query in writing. Follow up to determine when it is assigned to an officer. Follow through with the officer; anything they say on the phone as guidance is solid . . . but wait until you get it in writing. Then it is a ruling.

P.S. While the CRA search engine is thorough and massively detailed, don’t be afraid to try user-friendly Google searches, or speak to any officer at the Rulings Hotline, 1-800-959-8287.