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13 steps to prepare an effective cash flow budget

by , 18 June 2014
Whether you're a business finance veteran or novice, a cash flow budget can be a nightmare to put together. This simply because of all the elements you have to consider in this budget.

You have to work out common expenses as well as expenses that you might happen and then you need to remember to put tax expenses into your financial budget. It can all get a bit complicated.

But you don't need to be in a budget-daze any more. We have 13 easy-to-follow steps to help you put together your cash flow budget...

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Put together a cash flow budget in just 13 steps

According to the Practical Accountancy Loose Leaf Service, you need a cash flow budget to predict possible cash flow problems. You can do this by managing your expenses and income more effectively in this business budget. 
 
But first you need to implement your cash flow budget, which you can do in these 13 steps:
 
Step 1: Make a list of all the financial elements that affect your business;
Step 2: Take inventory of all of your stock;
Step 3: Estimate your business' sales based on its history;
Step 4: Estimate the amount of stock you'll need to purchase based on your expected sales;
Step 5: Plan and consider your debtors repayments if you have any;
Step 6: Determine and estimate the amount of income that might come from other sources;
Step 7: Carefully think about your business operating expenses;
Step 8: Consider your capital expenditure and purchases;
Step 9: Summarise any loans or debt payments that may affect your cash flow;
Step 10: Provide for expenses that you think may happen in the future;
 
So now you'll have the main structure of your budget in place. The next three steps will help you use your cash flow budget.
 
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Here are the last three steps for your cash flow budget

Step 11: If you have a negative cash flow, adjust your company budgets by cutting back, where possible, on expenses;
Step 12: Analyse your cash flow budget to ensure your business will have enough money to pay all its expenses; and
Step 13: Remember to check your cash flow budget regularly to ensure it's still appropriate. 
 
With these 13 steps, you'll have a fully functioning cash flow budget in no time.


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