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Budget deficit or cash flow – how the «holes» are closed!

Budget deficit or cash flow – how the «holes» are closed!

Quite often, especially in conditions of low monetary liquidity (tight monetary policy), one has to hear: "The budget is planned with a deficit"or "Flow deficit" cash is …».

Yes, this happens, but only when planning activities and on paper, whether it is the state budget or a commercial organization, enterprise.

In fact, the completed period of monetary deficit never happens, and can not be. Why?!

Because the deficit is a negative balance of funds, that is, the excess of expenses over their receipts.

negative cash balance - how can this be in fact

If someone says that during the reporting period we worked with a deficit, then this should indicate a negative balance of funds on the balance of payments or settlement account. And as you know, spending more than we actually have is complete nonsense or something from the realm of fiction.

In other words, we can plan the next month or year based on their needs and desires, taking into account the estimated sources of their income. At the same time, if the latter is not enough to cover the first, then there will naturally be a deficit, which even according to the plan should be covered by something.

In accounting language, it is interpreted as follows: "Credit, the balance of 51 accounts (settlement account), can never be". That is, for example, imagine «-» 100 rubles on a checking account or in your pocket!

In fact, the planning of any cash flow (budget or commercial activity) always assumes a forecast of zero or positive (surplus) cash balance on 51 accounts (settlement account).

Therefore, if a deficit appears according to the plan, with all the desires and capabilities of the one who plans it, then in any case (with correct and competent planning), at least it should be reduced to zero.

Usually, these budget "holes" are closed in 4 ways:

  • 1 by increasing the revenue side of the budget.
    For the state, these are taxes and deductions, and for enterprises and organizations - revenue.
  • 2 by reducing the expenditure part of the budget.
    For the state, these are pensions, state construction, healthcare, education, public debt service, housing and communal services, and for enterprises and organizations, the cost of products and services.
  • 3 – the accumulated balance of available funds for previous periods. For the state, these are gold and foreign exchange reserves, and for organizations - monetary reserve funds.
  • 4 by attracting credit or borrowed funds, taking into account their subsequent repayment. For the state - external lending, issuance of government bonds, etc., and for organizations - bank lending.

Therefore, always, even in the plan, the balance of the cash flow, at least, should be reduced to zero.

If the budget is adopted with a deficit, then this indicates that the state or organization plans to work with "wheels", throwing out any item of expenditure from financing or closing it with additional attracted loans. As a result, working from year to year with a conditional shortage of funds may result from excessively high creditworthiness, which may later lead to default, and for the people, it will just be an explanation: "Sorry, we worked with a budget deficit!».

Correct and correct planning always involves closing the cash balance, at least with a zero balance, and for a healthy economy, this should always happen without additional debt buildup.

Budget deficit or cash flow – how «holes » are closed! - Something like that!

автор - Михаленко Р.
M R. Автор - kaktotak.by Specialization: financial and economic design - modeling of business, investment projects of the real sector, analysis and evaluation of efficiency, optimization of the management decision system.

A wide range of web-based competencies for solving business problems.

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