Cashflow Projection vs Budgeting: Planning for a Healthy Business

JH Bookkeeping Solutions
Sep 29
2 min read

As a business owner, it’s easy to look at your Profit & Loss report and assume you know where your finances stand. But your P&L only tells you whether your business is profitable on paper — it doesn’t show the movement of cash in and out of your accounts. That’s where cashflow projection and budgeting come in. Understanding the difference between the two, and how to use them, can make the difference between thriving and scrambling at the end of the month.

Cashflow Projection vs Budgeting

Budgeting is about planning your income and expenses over a period of time. It’s forward-looking and helps you set financial goals — for example, how much you plan to spend on marketing or payroll each quarter.

Cashflow projection, on the other hand, focuses on the actual timing of money moving in and out of your business. It answers questions like:

When will invoices be paid?
When are large supplier payments due?
Will I have enough cash on hand to cover upcoming expenses?

In short, budgeting tells you what should happen, while cashflow projection tells you what will happen in terms of cash.

Why Profit & Loss Isn’t Enough

A common mistake business owners make is thinking their P&L shows how much cash they have. Your P&L includes all income earned and expenses incurred in the period, whether or not the money has actually moved.

For example, you might have a profitable month on paper, but if a large client hasn’t paid yet, your bank account could be low. Without a clear picture of cash inflows and outflows, you can’t make informed decisions about spending, hiring, or investing in growth.

What is a Cash Runway?

Your cash runway is essentially how long your business can continue operating before it runs out of cash, assuming no new income. It’s calculated by dividing your available cash by your average monthly cash outflow.

Knowing your cash runway is crucial because it:

Shows how much buffer you have for unexpected expenses
Helps you plan for slow periods or seasonal fluctuations
Lets you make proactive decisions about when to cut costs, invest, or seek financing

Benefits of Being a Proactive Business Owner

Proactive business owners don’t wait until the end of the month (or worse, the end of the quarter) to see how their cash is tracking. By regularly projecting cashflow and comparing it to your budget, you can:

Identify potential cash shortfalls before they become crises
Plan investments and growth with confidence
Avoid late payments to suppliers or staff
Reduce stress and gain peace of mind

In short, proactive planning allows you to control your business finances, rather than letting cash surprises dictate your decisions.

Take the Next Step

If keeping on top of cashflow and budgeting feels overwhelming, you don’t have to do it alone. I offer cashflow projection and budgeting services to help business owners see the full picture, plan ahead, and make informed financial decisions.

Reach out today to see how we can set up a system tailored to your business, giving you clarity and confidence with your cash.