A balanced budget can be a beautiful thing. Revenues equal expenses, the numbers fit neatly on the page, and everyone leaves feeling good about the year ahead. But a school can have a solid budget and still have a difficult time making payroll along the way.
The budget is an estimate of what to expect to bring in and spend over the year. Cash flow is like a road map: it shows when money will come in, when it needs to go out, and where we might run into trouble before we reach our destination. You need both, especially when the route changes. And it will change. Enrollment may come in below projections. A grant reimbursement may arrive later than expected. A position you planned to fill may change. None of that makes the original budget a bad one. It means the school has to update its view of the road ahead.
I once worked with a school that reviewed its budget and monthly profit-and-loss statement regularly. What it did not do was track or project its cash. From those reports, the year appeared to be on course, but no one could see what the bank balance would look like a few months out. Together we built a cash-flow projection that put expected receipts and payments on a monthly timeline. It showed a difficult stretch ahead: bills would continue to come due even as the cash available to cover them tightened. For the first time, their leadership team could see that stretch coming. They had time to look at what spending was already committed, what could be adjusted, and when they would need to act. That is a much better conversation than discovering the problem when payroll is around the corner!
Cash flow adds important context to the other financial measures. Fund balance is a good sign of health, but it will not tell you when money lands in the account. Days cash on hand shows how large the cushion is in the bank account, while the cash-flow projection shows when that cushion may be at its lowest. Michigan schools know why the timing matters. State aid generally arrives in eleven installments from October through August, so schools need to plan for costs that come due before the first payment of the new year. A healthy June 30th cash snapshot can still hide a tight position later on.
That forward view should guide decisions about staffing and programs, too. If enrollment is lower than planned, revenue changes while much of the school’s cost structure is already in place. Catch that early and you may be able to phase a purchase or adjust a hiring timeline. Temporary funding deserves an equally honest look. It can do tremendous good, but adding an ongoing expense with one-time money only works if you know how the school will pay for it when the money runs out. (Remember ESSER funding…?!)
This is also a good conversation for management to bring to the board. A few simple questions can provide visibility: What has changed since the budget was adopted? What is the lowest projected cash balance, and when will that occur? Will today’s commitments still be affordable next year? Those questions help leaders act before a bump in the road becomes a crisis.
A budget gives a school a plan for the year. A cash-flow projection helps leaders manage the year as it actually unfolds. When both are reviewed regularly, the board and management can see pressure building early enough to do something about it. That is when financial oversight is most useful… while there are still choices to make…!
Summit Management Consulting is proud to support MiCSS26. We look forward to connecting with school leaders and board members at the symposium about budgets, cash flow, and other school planning needs, because the climb is better together. #ReachingTheSummit
