When is a Sale a Sale - Confusing Sales Terms and Cash Flow Impact

The question today was what is the difference between booking a sale and making a sale. Here is a brief explanation from the Cash Flow Coach.

Does your borrower understand the accounting and cash difference between booking a sale and making a sale (invoicing their customer)? What you want to show in your cash flow forecast is the week you think a sales (or shipment to a customer) will happen or said another way, you are forecasting the week you will be invoicing the customer (usually when something ships). Then when you apply actual sales data later (shipped and invoiced), you are overwriting the budget/forecast/projected of invoiced sales with actual invoiced sales for that week.

Bookings means those sales in the future that a salesman confirms. So if this week a potential sale or lead becomes a confirmed order we call that a booking. The actual week that booking becomes a sales (a.k.a. shipped and invoiced order) could be weeks or months in the future. The bookings files is what is used to determine what to budget/forecast/project for future weeks sales. The amount booked in one week is not a sale (i.e., shipped and invoiced). It goes to a report often called a backlog report where orders/bookings are pulled from to make shipments and THEN booked as a sale.

The difference goes on to have major cash flow implications as the time lag between a booked sale and shipped sale can be days to weeks to months and as we know in entrepreneur land, every day counts.