One of the most important factors determining the efficiency of doing business for an enterprise is the ability to manage its solvency. The main tool for managing funds is the management accounting and budgeting system. Cash flow is controlled in budgeting using the Cash Flow Budget. In the article, the authors try to reveal the main approaches to the formation of a cash flow budget and propose their own methodology for forming this budget.

Cash flow budget

Under cash flow budget (CFB) understand the budget (plan) for the movement of the current account and cash at the cash desk of an enterprise or its structural unit, reflecting all projected receipts and withdrawals of funds as a result of the economic activities of the enterprise.

To effectively conduct business, an enterprise in the present and future must have a positive cash balance. That is why BDDS is given a leading place in the budgeting system. As V. Khrutsky notes, “in business there is only one irreparable mistake: to remain without funds in the current account or in the account from which current operations and investment projects can be financed.”

BDDS are compiled both to ensure the constant availability of funds allocated to fulfill the obligations of the enterprise, and to effectively use the excess of these funds. Consequently, the BDDS must provide measures against the so-called “cash gaps”, i.e. situations related to a lack of cash for current payments (measures may include bank loans, issuing shares or otherwise raising funds). Temporarily available funds can be directed, for example, to investment projects, bank deposits at interest, etc.

Thus, the BDDS must ensure the availability of an optimal daily balance (closing balance) of funds throughout the entire planning period:

Composition and stages of formation of BDDS in budgeting

The cash flow budget is usually prepared on the basis of the income and expenditure budget (IBB) and the investment budget. However, the BDDS cannot be calculated by calculation from the two mentioned budgets. This is due to the different methods of forming the BDDS and BDR. The budget of income and expenses is formed using the “accrual” method (i.e., income and expenses are determined at the point in time when they were actually incurred, regardless of payment), the cash flow budget is formed using the “cash” method (i.e. .income and expenses must not only be made, but also paid). In addition, there are budget items for income and expenses that are not related to cash flow (for example, depreciation, defects, shortages), just as there are cash flow items that are not related to current capital turnover and investment activities (credits and borrowings).
Intalev company specialists, for example, cite the following differences in the articles BDR and BDDS (Table 1):

Table. 1 Differences in articles BDR and BDDS

Article		BDDS
Depreciation
Revaluation of fixed assets and inventories
Defects in production
Damage and other losses
Shortages based on inventory results
Exchange differences
Obtaining/repaying loans (loans)
Purchase of fixed assets
Major repairs
Indirect taxes

Naturally, the BDDS, developed on the basis of the mentioned budgets, is compiled from parts that are functionally related to the corresponding parts of the BDDS and the investment budget.

Jai K. Shim identifies 4 main sections of BDDS:

Receipt of funds (balance at the beginning of the period, receipt of payments from customers and other debtors);

Expenditure of funds (payments to creditors);

Net cash flow (the difference between receipts and expenses);

Financial section detailing the receipt and repayment of borrowed funds.

Some researchers additionally highlight a section on investment activities, which refers to the activities of an enterprise related to capital investments (acquisition of buildings, structures, intangible assets, as well as their sale; making long-term financial investments in other organizations, issuing bonds and other securities). The last section is a reflection of the investment budget and describes the cash flow under the enterprise's investment program.

It is advisable to divide the procedure for developing a BDDS into a number of sequential stages. From the description of the budgeting process given in the work of V. Khrutsky, the following stages of the formation of the BDDS can be distinguished:

Determining the required level of funds to finance investment costs (for capital investments, acquisition of fixed assets, construction for own needs, i.e. all costs financed from the profit remaining with the enterprise after taxation);

Determining the minimum level of daily cash balance for unexpected expenses ( "closing balance" in expression (1));

Determination of budget revenue ( "receipts" in formula (1)) - are carried out on the basis of the sales budget, taking into account the analysis of the collection of accounts receivable, the budget for investment (sale of fixed assets and other assets of the enterprise) and financial activities (dividends, interest received);

Determination of the expenditure part of the budget ( "payments" in formula (1)) - are carried out on the basis of budgets for direct costs (labor costs, costs of raw materials and materials (usually, when determining the cost of raw materials and materials, accounting (standard) prices are used, which may differ from market prices) - taking into account movements of inventories of raw materials and supplies), overhead budgets (remuneration of AUP, other general shop and general business expenses), budgets for investment (purchase and construction of fixed assets) and financial activities (repayment of loans and interest on them, payment of dividends);

Formation of a cash flow budget, control and adjustment.

An example of a cash flow budget is given in Table 2.

Table. 2 Example BDDS

Index	Plan	Fact
Cash balance at the beginning of the period
Total funds received
Including:
From buyers for shipped products
Credits and loans
Dividends and interest received
Sale of fixed assets and other assets
Total funds spent:
Including
Payment for raw materials
Salary
Payment of dividends and interest
Expenses for the acquisition of fixed assets and other assets
Calculations with the budget
Other payments
Net cash flow
Cash balance at the end of the period

Application-contractual methodology for forming BDDS

The possibilities for effective cash flow planning depend on the planning period. Long-term (a year or more) and medium-term (quarter, year) BDDS can practically coincide with BDR. The longer the planning period, the closer the BDDS to the BDR. When moving to short-term (operational) planning, it is not possible to take the BDR adjusted for the same period as a basis due to the strong susceptibility of the cash flow process to random influences that are almost impossible to foresee at the stage of compiling the BDR, such as: fluctuations in terms and amounts of payment, conditions and volumes of supplies. In addition, data on the monetary expression of expenses in the BDR are usually approximate and are created on the basis of standard (accounting) prices for raw materials and supplies.

The traditional method of forming the expenditure part of the Cash Flow Budget, for example, described in the works of K. Shchiborshch or V. Khrutsky, allows the formation of a cash flow budget for a period of several months to a year, but is not always suitable for the needs of operational (short-term) planning for a period of up to 1 year. month.
In this regard, the authors propose, in addition to the traditional methodology, an application-contractual methodology, which involves the formation of a cash flow budget and a payment calendar (which refers to the schedule of receipts of funds and payments of the enterprise) based on applications for the expenditure of funds.

The key feature of the proposed algorithm for the formation of BDDS for the short-term period is that, first of all, an analysis is carried out of the current needs of the departments and the structure of payments for contractual relationships that developed by the end of the period. Only after this are the income and expenses included in the BDR and investment budget compared with the needs for the current cash flow. The result of such a reconciliation can be either an adjustment of the BDDS or a change in the BDDS and the investment budget.
This approach to cash flow planning corresponds to R. Bellman’s principle of optimality, known in the mathematical theory of optimal control: the optimal path of movement to the achieved goal from the current state in which the object is located does not depend on the history of the object’s movement to the current state. The “current state” of the object in our case is the situation that has developed at the beginning of the planning period regarding contractual relationships and the enterprise’s needs for funds.
The application and contractual methodology for forming the BDDS is presented in Fig. 1:

Figure 1 Application and contractual methodology for the formation of BDDS

When planning cash flows(Block 1 in Fig. 1) the estimated cash receipts are calculated based on the available planned data on income for a given period and the possible repayment of receivables by buyers ( Receipts).

The calculation of receipts is carried out taking into account the established practice of relationships with customers. To do this, using, for example, statistical methods, an analysis of the current activities of the enterprise is carried out and the following indicators are determined:

Receivables repayment terms;

The percentage of incoming advances from the total amount of products (goods) sold;

The time period from receipt of advances to the fulfillment by the enterprise of relevant obligations;

The percentage of “bad” debts in the total share of invoices presented to customers.

These indicators are calculated for each type of activity by groups of counterparties. To do this, you can use the company's accounting database.

After calculating the total amount of planned revenues, the maximum possible amount of payments for the period is determined:

Payments = Beginning Balance + Receipts - Ending Balance - Reserve, Where

Beginning balance- actual (in the absence of such data - planned) cash balance at the beginning of the planning period;

Balance- planned cash balance at the end of the planning period;

Reserve- cash reserve for unplanned, emergency payments.

Planning cash payments carried out on the basis of approved applications and contracts (block 2 in Fig. 1). Within the framework of this methodology, it is assumed that a database of agreements will be created in which all financial and business agreements concluded with the enterprise are registered. For planning cash payments based on one-time relationships with counterparties that are not formalized in contracts, the document is intended application(The approximate format of the tabular part of the application is given in Table 3). The application is prepared by the department for expenses for current activities. A prerequisite for the application is the presence of documentary evidence of each line of expenses (invoice, certificate, production plan).

Table 3 Application format

The frequency of drawing up requests corresponds to the frequency of budget planning. When using several plans with different intervals, applications are drawn up for each period.

Upon receipt of applications for all structural divisions of the Enterprise, an analysis of the received data is carried out. Drawing up a cash payment schedule is carried out in two stages:

Determining the purpose of payments;

Determination of payment dates.

At the first stage, after determining the maximum amount of payments (Payments), the highest priority payment items are selected. If the maximum payment amount is not enough to cover your highest priority (obligatory payment) items, then a conclusion is made about the need to obtain a loan in the amount necessary to pay these expenses. Credits and borrowings increase the Company's income for the planned period, but increase payments for subsequent periods.

At the second stage, payment dates are determined. To do this, a schedule of cash receipts is drawn up, on the basis of which the cash balance for each planning step is determined (minimum, indivisible planning period - for example, a day, a week, etc.).

Table. 4 Form of cash flow calendar plan

Initially, the terms of the highest priority payment items are determined based on the required payment terms and the Company’s capabilities to fulfill these obligations. Next, payment terms are determined for the remaining items, starting with the highest priority items and ending with lower priority ones. At the same time, cash gaps are monitored, i.e. absence of periods with negative balances at the beginning and end of the period.

In addition, the amount of payments by item is formed taking into account expense limits for each division, established on the basis of the planned budget and investment budget (block 3 in Fig. 1). If the payments are appropriate and necessary, a decision is made to make adjustments to the BDR and the investment budget.

After selecting the items and determining the payment terms, the divisions’ application fields are filled in, confirming the payment of the selected items within a certain time frame in the planned amount and quantity. In table 5 shows the columns of the tabular part of the application, filled out by the person responsible for determining the terms and items of payments.

Table 5

Applications with approved deadlines and payment items are returned to the heads of the department. When generating applications for the next period, department heads have the right to again indicate in the application items that were not passed (did not receive confirmation of payment) in previous periods.
Based on the report on approved applications (payment schedule), as well as the cash receipt schedule, a payment calendar is formed, and based on the latter - the BDDS (block 4 in Fig. 1).

An important aspect of the proposed methodology, along with the compilation technology, is the organization of planning work. The methodology for forming the BDDS should be part of the planning regulations at the enterprise (to be enshrined in internal regulatory documents) and be mandatory for use for all departments.

Applications for the period, grouped and displayed in the form of a report by department, are submitted to the manager responsible for the expenditure of funds. The report is analyzed by priority of applications, by expense items, by type of activity, and for each line of the application the amount and date of payment for applications are indicated. Unapproved applications must be submitted the following month along with new applications.

When organizing planning, it is necessary to provide for control operations:

Compliance of BDDS articles with limits (determined by the BDDS and investment budget);

The feasibility of the costs and overruns (comparison with the production program);

Limit on cash balances at the end of the period in case of unforeseen expenses;

Controlling the absence of cash gaps.

Control is carried out in accordance with the planning regulations, the main principles of which are:

Compliance of submitted applications with the financial plan;

Making payments based on written requests from the initiating services;

Transfer of funds is made in accordance with the payment register approved by the Financial Director.

Applications for payment submitted by departments in excess of the plan are paid only with the permission of the General Director (or the person replacing him).

When “cash gaps” arise (i.e., a situation when the expenditure side of the budget exceeds the revenue side, and the final cash balance on a specific date becomes negative), measures are taken to eliminate them - a decision to “cut” expenses (or shift expenses over time) or obtaining a bank loan.

The proposed algorithm for forming a cash flow budget was successfully applied at a large enterprise supplying network gas, OJSC Sverdlovskoblgaz.

The application of the technique showed that the technique has the following advantages:

Simplicity. The technique is quite simple to use and implement in production.

Credibility. Reliability is achieved due to the fact that data is presented only about real necessary costs, and all departments of the enterprise participate in planning.

Visibility. Performers promptly receive a report on approved and unapproved expenses.

Literature

Khrutsky V.E., Sizova T.V., Gamayunov In-house budgeting. Handbook on financial planning - M.: Finance and Statistics, 2003.

Upchurch A., Management accounting: principles and practice: Trans. from English/Under. Ed. Sokolova Y.V., Smirnova I.A. - M.: Finance and Statistics, 2002.

Shchiborshch K.V., Budgeting the activities of industrial enterprises in Russia. - M.: Publishing house "Delo and Service", 2001.

At an enterprise, management draws up different budgets and balances. These reports are complemented by BDR and BDDS. Behind the abbreviations lies the budget of income and expenses, as well as the budget of cash flows. The purpose of these reports is the same, but they are generated in different ways.

BDR and BDDS - what is it?

The income budget contains information about the amount of planned profit in the next period. When forming it, the cost of production, revenue from all types of activities, and profitability are taken into account. A BDR is designed to distribute profits over a specified period.

The cash budget reflects the cash flows of the enterprise. That is, the report includes only those items for which the movement of funds took place. The report is used to redistribute funds.

Differences between BDR and BDDS

1. BDR contains information about planned profit, BDDS - the difference in incoming and outgoing cash flows.
2. The BDR is similar in structure to the income statement, and the BDDS is similar to the cash flow statement.
3. The BDDS, unlike the BDR, includes only “monetary” items.

Report structure

Let's take a closer look at what indicators are reflected in each of the reports. Let's use the table to better perceive the information.

When creating budgets, the finance department has the most questions regarding taxes. Should VAT be included in the BDR? As practice shows, the amount of taxes does not affect as such. This is especially true for organizations that use this balance to manage the economic activities of production. Therefore, the amount of accrued taxes must be derived from the report.

How does BDR work?

The basic principle of budgeting is to include in the report all indicators characterizing the activities of the organization. Only if the BDR and BDDS contain all management budgets can we talk about the integrity of the system. Moreover, these two reports complement each other.

The sales department is responsible not only for the quantity of products sold at a certain price, but also for the receipt of funds from customers. The BDR does not contain information about debts or payments. Using figures from only one report, it is impossible to build a holistic budget model.

The manager is given the task “sell at any cost,” and he quickly fulfills it. Management is already calculating profits and awarding bonuses, but is faced with an unexpected problem - the company does not have the money to purchase raw materials for the next batch of goods, and the supplier does not provide trade credit. The manager sold the goods and was given the accrued bonus. It’s just that the money hasn’t actually arrived yet. Therefore, the remaining managers were left without work.

This is the simplest example of illiterate financial management. The result of the work should be assessed not only by the amount of profit, but also by the amount of funds returned. Then they won’t arise. To do this, it is necessary to form a BDR and BDDS.

How does BDDS work?

Sometimes the finance department only draws up the BDDS, forgetting about the accruals. Managing the economy is just dangerous. Received is money not yet earned. Accrued profit is reflected in the BDR, and the fact of its receipt is reflected in the BDDS. They rarely coincide. Most often, an organization has either a receivable (payment from a client) or a payable (advance) debt. Therefore, it is necessary to prepare BDR and BDDS reports at the same time.

Many managers recognize revenue only when funds are received and expenses when funds are used. But in this case, the debt is not displayed, and an important part of management information is lost.

To clearly show what errors can result from managing an economy using the cash method, let’s look at a simple example. The fitness club is selling out memberships for 3 months in advance in September. It serves customers throughout the fourth quarter, and at the end of the year it organizes a similar promotion. Since 90% of sales come from individuals, there is no need to talk about accounts receivable. But the organization has obligations to serve customers. All this is the result of an incorrectly set task - to make money.

Example

Let's continue the above example in numbers. Let's compile the BDR and BDDS of the fitness club.

After the sale of season tickets in September, the workload on the coach increased. If a profit is made in an already developed business, managers more often withdraw funds from circulation, and if they receive losses, they inject their own capital. This is very clearly visible in the BDR and BDDS reports. The funds received in September are not money earned yet, but an advance towards future services. They cannot be taken out of business.

How to evaluate the results?

Conclusions should be drawn only after a comprehensive review of the BDR and BDDS at the end of the period when the obligations have already been fulfilled. In the example discussed above, this is the end of November, when the club has worked out all the advances received. Only after this can you withdraw money from the account. Then the amount of funds earned will be equal to the account balance.

Conclusion

Revenue should be recognized at the time of sale, and expense at the time of purchase, not payment. In this case, BDR and BDDS will be interconnected. Management will be able to review the integrity of the management model.

A cash flow budget is a plan for the movement of a current account and cash at the cash desk of an enterprise, reflecting all projected receipts and withdrawals of funds as a result of business activities. BDDS shows possible receipts of prepayment for delivered products (to a current account or to the cash register), advance payments, delays in receipts for products shipped earlier.

BDDS reflects the need for external financing (volume of loans, investments), and also contributes to a more accurate determination of the volume of external financing. The purpose of the document is to ensure a balance between cash receipts (corresponding to planned income) and their write-off (in accordance with planned expenses for budget periods).

If it turns out that the cash balances at the beginning of the budget period (opening balance) will be insufficient to cover the expenses planned according to the profit and loss budget, as well as other types of expenses in the corresponding budget period, then for this business it is necessary to take steps to find additional sources of cash funds.

The cash flow budget is the main financial planning document, compiled for the entire forecast period and represents a forecast of cash inflows and outflows, which is classified by type of financial and economic activity:

• current (operating) activities ensure the implementation of the commercial functions of the enterprise and generate the main cash flow;
• investment activities include the receipt and use of funds associated with the sale of fixed assets, capital investments, income from long-term investments;
• financial activities are associated with the receipt and repayment of short-term loans and borrowings, accrued interest and dividends.

BDDS formats may vary depending on the specifics of the company’s activities. But in all cases, BDDS items are interconnected with the profit and loss budget, the capital investment budget and the loan portfolio budget. In the BDDS, all cost items are shown according to the method of their payment (i.e., they correspond to the payment schedules for receivables and payables).

The cash flow budget consists of two main parts:
Receipts (sources of funds)
Expenses (use of funds)

The development of a cash flow budget begins with identifying the sources and components of possible cash flows in the upcoming budget period. In general, sources of funds are divided into three groups of items: receipts from operations, receipts from external sources and other receipts. However, it all depends on the specifics of the business.

Incomes (sources of financial assets) reflect only those funds or financial substitutes that can actually be received into a current account or otherwise in a given budget period. These sources can be of two types: external and internal. External receipts are loans and investments. Internal revenues are divided into two groups: income from sales and non-operating income.

Expenses (use of DS) in the BDDS are divided into three main categories. Funds can be used to finance:

• Current operations
• Capital investments
• Other expenses

Financing of current operations is a reflection of the order of payment of cost items and expenses listed in the profit and loss budget. However, discrepancies may arise due to both the specifics of the activity and the real financial situation of the company.

Other expenses in BDDS include the following items:
payment of interest on a loan
repayment of loans and loans
payment of dividends and other settlements with investors
settlements with the state budget

The ending balance is the main target indicator of the budgetary budget, around which the entire process of optimizing individual items of a given budget should be built. In any case, the ending balance cannot be negative. The amount of the final balance is one of the most important indicators that can be planned in the BDDS. It is not standardized, but rather established by the company’s management.

The key goal of cash flow analysis is to optimize cash flows and determine the adequacy of funds, identifying the causes of deficits or surpluses. When excess cash flow is received, a high positive cash reserve is formed, which can be used to generate additional profit. Deficit cash flow is formed when there are insufficient funds to cover needs.

Planning and monitoring cash flows at enterprises, developing solutions for managing receivables and payables helps ensure financial stability, solvency and balance sheet liquidity.

Let's consider the fundamental document for reporting at an enterprise - the cash flow budget. To organize the work of a company, three main reports are needed: BDR, BDDS and BBL. These three financial documents are capable of organizing competent management in any enterprise. Each of them has its own goals, objectives, forms and its own filling out features, which are necessary for study and understanding when implementing the budgeting process. Companies that do not have competent and experienced financiers and accountants on staff and experience difficulties with reporting are better off using innovative budgeting systems based on application programs. This will help them avoid numerous mistakes and optimize the balance sheet of the enterprise.

Rules of life and business

Any family (household), even consisting of two members, or any organization with only a few employees, draws up, adjusts and monitors the execution of its own cash flow budget. This is the basis of budgeting. The process of budget formation itself, as a rule, begins with the budget of income and expenses (BDR).

The main goal of planning income and expenses is to prevent one from exceeding the other, otherwise a legal entity or individual will experience a liquidity (solvency) crisis.

Reporting forms

Controlling the expenses and income of an enterprise involves drawing up the following documents:

• BDR. It is similar to a profit and loss statement.
• BDDS. A statement resembling an accounting form showing the flow of funds in monetary terms.

Such reporting gives business owners a 100% understanding of the current state of the enterprise and the possibility of its development.

The basis for drawing up the first report is:

• Acts of acceptance and transfer of assets.
• Documents reflecting the company's revenues and expenses.

The basis for drawing up a cash flow budget:

• Receipt and expense orders.
• Transcripts of transactions on bank accounts.

BDD and BDDS

The development of a cash flow budget is carried out to distribute financial flows. It shows the organization's operations in cash and tracks transactions across all bank deposits. In other words, this is a plan for the movement of cash in the company's cash register and funds in current accounts with credit institutions, reflecting all receipts and debits of money. The main task of the budget is to protect the enterprise from the inability to carry out activities due to lack of resources.

The BDR is developed to forecast profits, reflects all data on the cost of production and revenue received and includes the following financial indicators:

• income;
• expenses;
• financial result (profit).

The purpose of traffic safety

The forecast cash flow budget is designed to solve the following problems:

• Managing the liquidity and solvency of the company (ensuring timely payment of all upcoming expenses). Preventing a shortage of financial resources, on the one hand, and an excess of money supply, on the other hand. Free funds should not accumulate for a long time in accounts and in the cash register.
• Increasing payment discipline (concluding administrative and economic contracts on favorable terms). Making, for example, advance payments under contracts for the supply of goods and services leads to an irrational distribution of the money supply and an increase in the debt of counterparties to the enterprise.

Using BDSS allows you to answer a frequently asked question from company owners about the availability of profit and the lack of free money at the same time.

Basis for compiling BDDS

Cash flow budget analysis involves assessing three types of enterprise activities:

• Operating activities. This type creates the receipt and expenditure of resources through the production and sale of goods and services and other related transactions associated with the movement of money. Consolidation of resource flows for main activities occurs by collecting information from schedules of revenues from sales, purchases of resources, and tax payments. When developing schedules, time conversion factors can be used to determine payment by period. When forming the flow of resources for the main work of the enterprise, it is very important to ensure that it is greater than zero. In certain periods of time, payments and obligations may exceed income. If this happens regularly, then there are difficulties in the functioning of the company, since it regularly diverts earned funds. If the flow of an activity is always less than zero, this does not mean that the main line of work is unprofitable. A company may have a positive financial result every month, but due to the rapid growth of customer debt or unsustainable inventory, funds are diverted on a regular basis and a problem arises with the current solvency of the enterprise.
• Investment activities. It is associated with the purchase or sale of assets not involved in the main activity, using free resources. The purpose of investing is to achieve a positive financial result or beneficial effect. Financial flows for this activity are consolidated on the basis of development budgets and the schedule of receipts of payments for non-operating work (income and expenses).
• Financial activities. Work leading to changes in the fixed capital of the enterprise. This is the attraction and return of borrowed funds necessary for the enterprise to develop innovative areas of production. Flow planning for financial work begins after flow for other activities has been planned and resource surpluses or shortages are known.

Distributing the company's work into types helps to assess the impact of each of the three areas separately on the financial result and the amount of capital the company has at its disposal. A well-calculated company ensures the constant availability of money required for the operation of the company. BDDS suggests how, when and to what extent to use the excess resources of the enterprise in circulation. The main rule of business is that free resources should not remain idle for a second in bank accounts, but should constantly work and bring additional profit to the company.

Straight line method for BDDS

There are different ways to create a cash flow budget. An example could be:

• straight;
• indirect.

In direct budgeting, cash flows are used by income and expense items. When using the indirect method, resource flows are calculated by decreasing or increasing the enterprise's budget items on the balance sheet.

With the direct method, cash flows in the report are usually divided into three financial sectors: from core, financial and investing activities. For the smooth functioning of the company:

• In the long term, for long periods, the cash flow from investing free funds should be less than zero, because the company needs to develop and increase current assets.
• The balance from financial activities may be negative for a long time. The company will have time to use and repay the borrowed funds, the flow on these positions will be zero. In this case, interest on the loan relates either to the main activity (replenishment of current assets) or to investment work (purchase of fixed assets).
• The flow of cash resources for financial and investment activities (payment of dividends) may be less than zero. In this case, the balance for the main work must be positive and cover all negative results for other types of work.

If a company has cash flow from its core activities that is less than zero over a long period of time, it means that it is experiencing cash insurmountable difficulties. After all, a business must have a positive flow of funds and results. In certain periods, the balance of core activities may be less than zero. Such a situation cannot be constant over several reporting periods of time for a successful business.

The "indirect" method for BDDS

The cash flow budget by indirect calculation is used to determine the mutual relationship between financial flows, results and changes in the position of the company. From the BDR, items on retained earnings, dividends and depreciation are taken. Other information about the decrease or increase in items of assets and liabilities for compiling the indirect method is taken from the BBL, therefore the budget of the cash flow statement is called a summary document demonstrating the change in the operating position reflected in the company's balance sheet.

BDDS can be formed by an indirect method and when planning for the long term. When drawing up a plan, you can use a simple model consisting of three budgets, that is, this model does not use a scheme for combining budgets. When planning for the future, this can be allowed, since drawing up several operating budgets for a long period will not provide the necessary accuracy. The use of a simple operating scheme by calculating the indirect method of compiling the BDDS will greatly simplify the calculations. The result will be obtained quickly and will not require labor costs.

To control the execution of an enterprise’s cash flow budget in real time, it is convenient to form it in the context of operating cost centers that initiate payments under BDSS items. At the same time, it is necessary to strictly set limits for each division.

Stages of compiling a BDDS

Formation of cash flow budgets consists of several steps:

• Determination of the minimum allowable cash balance at the enterprise (closing balance). This indicator determines the specifics of the company’s activities and the likelihood of unforeseen situations.
• Formation of income based on a consolidated sales plan and income from investments. There are two possible ways to determine a company's income: "bottom-up" (income plans from departments are compiled into a common set) and "top-down" (a centralized plan is distributed and communicated to departments).
• Compilation of expenses based on direct costs (wages of employees, raw materials, overheads, production, general expenses), investment costs and other financial obligations to pay for loans, interest and dividends.
• Formation of net cash flow (cash). Cash flow shows the difference between a negative and positive balance over a period of time. The indicator characterizes the current financial situation at the enterprise and determines the possibilities for its development. If costs exceed income, then a situation arises (lack of money in real time) enterprise. The final balance then becomes negative. In such cases, measures are taken to eliminate the disadvantage by cutting costs or using reserve sources for further business.
• Adjustment and approval of cash flow budget blocks. The approved report is an official document for all personnel.

Execution control

The cash flow budget in an organization must not only be carefully thought out during its formation, but also subject to strict execution and prompt adjustment when necessary. To do this you need:

• Discipline personnel in the financial sector of the enterprise. Operational control on a daily basis is the key to the correct distribution of enterprise assets. If managers and employees correctly execute the company's budget, this will ultimately lead to the prevention of cash gaps.
• Use the services of companies specializing in operational management. If the company's management doubts its own professional resources, then it is necessary to invite experts. At the same time, service on an ongoing basis will be more profitable than a one-time consultation with third-party specialists.
• Use innovative budgeting systems using software products. Modern applications are modern designers and report generators that create a cash flow budget of any required level.

Rules for successful budgeting

Budgeting is the basis of a company’s well-being and its stable, profitable development. For its strength it is necessary:

• Accuracy in compiling BDDS. Financial professionals need to achieve maximum certainty and accuracy in costs and especially in cash receipts. This is extremely important if the company is experiencing problems with liquidity (lack of resources for operating activities).
• Prompt report correction. If the plan-actual analysis on a monthly basis does not reveal significant numerical deviations, then changes to the budget are not required. The analysis must be carried out regularly, as required by the approved budgeting regulations.
• Drawing up a payment calendar based on the BDDS. The payment calendar details the cash flow budget with examples for smaller periods. The tool is being developed for daily management of financial flows. Without a payment calendar, it is impossible to competently manage financial flows to ensure and implement the BDDS. The payment instrument can be compiled monthly with weekly detail or even broken down by day, and can be adjusted every week or as needed.
• Confidentiality of the report. The cash flow budget includes information about the economic patterns used in the company, receipts and payments known only to the owners of the business. In BDR and BBL such moments are not highlighted. There is no need to worry about keeping this information secret in these reports. Based on the foregoing, the approver of the BDDS and the specialists drawing up the report are personally responsible for the confidentiality of the BDDS.

BDDS in Excel

The income and expense plan is drawn up based on the goals, organizational structure of the company, approved accounting policies, income and expense patterns and other features of the activity.

A cash flow budget in Excel is created using forms in the format of this application. Reports are linked using calculation formulas and macros. The reporting forms may be as follows:

• With consolidated cash flow budget items or more detailed indicators.
• Broken down into long-term periods (for example, by quarter) or into more compressed time periods (monthly budget with weekly breakdown).

The type depends on the need of the company's management for a specific type of cash flow budget.

Example in Excel:

BDDS	Period (quarter)
Index	1	2	3	4
Residual balance at the beginning of the period
Cash receipts
Revenue from sales of goods
Advances received from buyers
Payments (deductions)
Salary expenses
General production expenses
Commercial royalties
Management costs
Income tax
NPV for main job
Investing funds
Financial activities
Obtaining credits and loans
Repayment of loans, including interest on them
NPV for financial work
Remaining balance at the end of the period

Budgeting in Excel is a labor-intensive process. Necessary:

• collect all functional vaults;
• register macros for reliable display of summary results.

An example of budgeting based on the Excel platform has a huge number of disadvantages:

• Only one financial department specialist can work with the report in real time.
• Impossibility of coordinating the functional budgets of the enterprise.
• There is no restriction of access to information of certain persons.
• Difficulty in combining reports.

If you imagine an enterprise that has a holding structure and a branch network, you can imagine how complicated it is to draw up budgets in Excel. Thus, the Excel reporting process is not the best choice for a large company. Many business owners see a way out of this situation by purchasing or developing their own special software products for planning.

Modern software products have applications that allow:

• financial specialists can independently configure the structure of reports and their relationships to obtain actual calculation data;
• interact with external accounting systems;
• gain the opportunity to use external indicators both for calculating your own indicators or generating reports, and for entering actual data in budgeting registers.

Interfaces of modern programs allow you to effectively build business processes at all stages of a company’s activities:

• development of a budgeting system at the enterprise;
• coordination of reports at all stages and their operational adjustments;
• reflection of actual data on planning items according to the classifications of expenses and income;
• control over the execution of budgets at all levels;
• plan-fact data analysis using modern reporting tools;
• making management decisions by business owners on the development of areas of activity.

In the organizational system, a special role is given to their budgeting, i.e., drawing up and analyzing the cash flow budget. We will tell you more about this budget in our material.

How to make a cash budget

A cash flow budget (CFB) is a plan for the movement of cash and non-cash funds of an organization for a certain period of time. Such a budget can be drawn up both for the organization as a whole and for its individual divisions and responsibility centers. The budget is usually prepared for the year, broken down by month. The details of cash flow indicators in the budget are determined by the organization independently. At the same time, the breakdown by cash flow items and their enlarged groups is often made by analogy with the grouping given in the Cash Flow Report (Order of the Ministry of Finance dated July 2, 2010 No. 66n). Thus, an organization’s cash flows can be presented in the budget in the context of current, investment and financial operations.

In this case, for example, for current operations, the receipt of funds in the budget can be detailed in the following form:

In a cash flow budget, planned indicators are compared with actual ones, as a result of which deviations are identified. These deviations are further analyzed from the point of view of the cause that caused them and the consequences that the resulting deviations had on the activities of the organization. Cash budget indicators can be analyzed not only by comparing actual data with planned data, but also by comparing actual data with data from previous periods. In addition, a vertical analysis of budgetary budget items can be carried out in the form of determining the ratio of some budget indicators to others, incl. by finding the share of a specific indicator in the total value of a cash item. For example, the share of cash expenses for wages in the total cash outflow from current operations can be determined.