Importing your Bank Balance from Xero or QuickBooks Online is a great way to see a snapshot of exactly how much actual cash you have on hand today. But often, you will find that amount differs from your Dryrun numbers and it can be difficult to reconcile the two on any given day. Here’s why:
As an example, let’s say you have $2,000 in your bank account and you need to pay your office rent of $1500 in two days, so it looks like you are in good shape. But, you also have a credit card bill due in five days for $1100 and your cable company automatically withdraws your $200 payment for your internet in 10 days.
That means that you will be overdrawn within 5 days and have a second default payment within 10 days if you don’t make deposits into your bank account of at least $800.
You know that you’ve invoiced a customer last month for $1200 but you’re aren’t sure when it will arrive in your bank account. Will it come in within the next 5 days so that you can pay all of your bills?
This is a simplified example of the problem of getting paid and paying your bills on time. But most small businesses will be juggling a much more complex set of inflows and outflows. As such, your account balance is unpredictable and you have no visibility of what is on the horizon. Even in the simplest situations it can be difficult to remember the exact details of all your payables and receivables.
The bank balance figure we can access from your accounting tool gives us the month start figure and you have the option of also importing ‘today’s’ bank balance. The day/week start figures are based on the calculations from your recurring budget in Dryrun combined with the invoices and bills that are imported.
Discrepancies can happen when bills or invoices have either been paid and the funds are in your bank but the payments haven’t been registered in your accounting tool yet (or you haven’t refreshed your data).
And when you print a cheque it’s immediately deducted from “the books”, even before the stamp is on the envelope. But remember, it has NOT been deducted from your bank account yet! It has to go through your vendor, into their bank and then it finally is removed from your bank account.
There are also potential discrepancies if some of the repeating budget items that you may have entered into Dryrun have an actual pay date that differs in your bank account. For instance, some of your expenses may be paid on a credit card and that amount is estimated in your repeating budget, but in reality you pay the entire credit card bill he following month.
That being said, Dryrun is best used with an overall picture in mind of how you want your business to grow, and how you plan to tackle potential shortfalls to avoid catastrophic losses. Forecasting is unlikely to be penny perfect, however the information you do receive is further reaching and absolutely critical.
If you are finding that your bank balance is vastly different from your Forecasts on a regular basis, consider how you are using Dryrun in your business.
Perhaps you can narrow your focus entirely on core issues such as sales forecasting and tracking invoices – especially if you have an adequate operating cash flow buffer. Or if you are working hard to prevent a cash flow crunch, it may be wise to update Xero/QuickBooks Online and Dryrun more frequently, and more accurately predict when cheques, direct withdrawals and cash will actually leave your account.