Developing A Company Budget Without A Cash Flow Is Like Going On A Motor Trip Without Knowing How Much Gasoline Is In The Tank.

During my career as a practicing CPA I have been involved in reviewing, auditing  and compiling company financial statements. I have seen controllers CFOs and bookkeepers struggle and spend inordinate amount of time developing a company budget, with  the most important pieces of the process not developed. The cash flow forecast and forecasted balance sheets. Why not?
There are several reasons:
1. Developing a company budget can be relatively easy. It's what I call a flat forecast. Sales less expenses equal the bottom line, Pretty simple. Add a cash flow to the process it becomes significantly more complex, more time-consuming and is often skipped. Forecasted balance sheets, out of the question.
2. It seems that since we have a bad economy many companies in their search for reduction of expenses seem to have picked on the accounting department to reduce "non-revenue producing expenses". Therefore controllers CFOs chief accountants are short staff and  on overload. Preparing an annual budget is nothing more than a chore and therefore is developed on a last-minute basis.
3. To ask your outside accountant to prepare budgets, cash flow forecasts and forecasted balance sheets becomes an economic nightmare. The preparation is not the nightmare but the invoice that is sent to the company is overwhelming. The reason for that is simple, generally outside accountants don't prepare financial forecasting or budgeting for their clients therefore when asked to do so they spend an great deal of time developing a model that you get to pay for.   
4. Management seems to be primarily interested in increased sales and profitability. Therefore accounting personnel prepare budgets/forecast that are strictly related to profit and loss. Management then spends the next 12 months wondering why do I have all this profit with no cash.
As you know the banks are not as generous as they used to be. Therefore it is incumbent upon management and the accounting personnel to make certain that the company knows well in advance how much cash will be required to run the business and meet their goals and objectives for the next 12 months or longer.
Cash is king. Always has been. Always will be, The three most important questions that management must have the answers to at all times: How much cash will I need? When will I need it? Where will I get it? 
When you know the answers, you will sleep better.
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