Are you getting everything you need out of your cash flow budget?
A cash flow budget is a control method no company can do without. After all, it's so much more than a company budget that records all your income and expenses. It also helps you control your company's saving, borrowing and spending too.
But are you getting all of the benefits you should be out of yours?
Read on to discover the four benefits you'll get if you create a really strong cash flow budget...
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Are you enjoying the four benefits of a good cash flow budget?
1. It gives you greater control over your finances. You can make decisions based on the outcomes you expect. For example, if you see debtors don't pay within their accepted terms, you can address the situation with early payment terms;
2. It gives you a target or objective to work towards. You can use targets to compensate good performance and motivate employees;
3. It provides a way to measure your company's targets and performance; and
4. It helps you create budget plans for future finances and cash flow. You can make plans and decisions in advance about your cash flow.
But how will you know if your budget is working properly? According to the Loose Leaf, it will if it covers these four functions:
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The four functions your cash flow budget should cover
1. Your cash flow budget must be an estimate of all income and payments you expect to take place during a certain budgeting period;
2. You must use the budget as part of your financial and account management and for further budget preparation;
3. The budget will tell you if the company has enough money to pay the bills at the end of the month; and
4. The budget must also be a short-term financial management tool. Revise and revisit it regularly to ensure your plan's are up to date
If your cash flow budget does all of these functions, then the benefits will follow.
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