Cash shortfall
A shortfall is a funding condition, not the same concept as the forecast used to identify it. It can arise despite accounting profit when customer collections lag payments, investment absorbs cash or facilities are unavailable. Establish the amount, duration and causes, then evaluate additional funding, accelerated receipts or changed spending without ignoring costs and operational consequences. A negative forecast balance may indicate an unarranged borrowing need rather than actual cash already spent. Distinguish a temporary timing gap from persistent inability to generate cash.
Worked example
A weekly forecast shows available cash$20,000 and due payments$32,000, creating a$12,000 gap before other facilities. Management checks payment timing and suitable funding rather than assume profitable sales settle the gap immediately.
Common mistake
Equating profit with cash available or calling the forecasting spreadsheet itself the shortfall.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FM | Supporting | September 2026–June 2027 |