Publish Date: June 3, 2006
Cash flow budgets should be thought of in the same way we think about weather forecasts. Many producers complain that cash flow budgets aren’t accurate and many times miss the mark by the end of the accounting year. Don’t we say the same things about weather forecasts? Producers say it is hard to forecast price, production, input costs and other items needed as they develop the cash flow budget. The budgets are hardly ever 100% accurate. Weather forecasts are similar. Despite the fact the weather forecast isn’t accurate; we still look to the forecast every day. It still gives us a better look at the weather around us than if we had no forecast at all. Cash Flow Budget can be looked at in much the same way. While they are not going to be 100% accurate, cash flow budgets give us a very good idea of what the business’s future will hold based on the facts and information we have about how the business performed in the past. Most successful producers depend on cash flow budgets like they depend on the weather forecast, even though neither are 100% accurate.