Talking about the actual cash inflows vs outflows of money through your bank account(s) is something that a number of businesses struggle with as a concept and is core to understanding how to structure your first two Dryrun Scenarios.  Consider how you'd classify 'real' money as compared to 'imaginary' money in your business and the difference becomes clear almost immediately.

Real money can be invoiced for

  • It impacts cash flow and your budget

  • It has a 'paper trail' that results in invoicing and payment

  • It is posted to your bank account and you can predict which day it might enter your accounting ledger

  • It is the 'bird in the hand'

Imaginary money is what you're forecasting - or hoping - will happen

  • You readjust your budgetary ceilings for next fiscal year

  • You plan sales quotas

  • You start to hammer out sales 'deals' with particular customers

There is a point in time where your forecast becomes actuality

  • The deal is won and work has begun

  • The budget has been exceeded

  • Factors that you have forecasted have since caused a concrete increase or decrease in your cash flow or budget items

 

Did this answer your question?