Your company's cashflow budget won't be that useful if you don't know how to use it effectively.
Is that a risk you can afford to take?
Use these seven methods to get the most from your cash flow budget
#1: Revisit previous budgets. The Practical Accountancy Loose Leaf urges you to use past cash flow budgets as a reference point to understand what to include and what to leave out in your budget.
The Loose Leaf adds that it's likely during this review you'll spot errors you weren't aware of. You can fix these in your new cash flow budget.
#2: Do research and investigate. Involve people in the departments you're budgeting for. A cash flow budget is a living document. You need to continuously update it based on experience and results from past budgets.
So ask everyone involved in your business for input to make sure the budget's reasonable and appropriate.
Consult these important people to formulate your cash flow budget:
In addition, be sure to review these important documents to formulate your cash flow budget:
#3: Time cash flows for both receipts and expenses properly. For example, debtors may only pay in60 days and get discounts if they pay within ten days after receiving the invoice.
This significantly affects the cash flow budget, because you can receive your money sooner than expected.
#4: Remember Vat on transactions both payable and receivable. Your budget can help determine if you should register for Vat. If your turnover is over R1 million, or you expect it to be, you must register for Vat.
#5: Make provisions for transactions you're aware of but don't necessarily know the exact amount for. This can help you understand the effect of the transaction when you reflect on it in future.
#6: Budget for SARS expenses like provisional tax and income tax payments. Also remember the monthly EMP201 and VAT201 submissions you need to make to SARS.
#7: Don't forget about inflation when you prepare a budget. Cost such as bank charges, insurance go up every year due to inflation and normal progression. So make sure you budget for this.
Well there you have it. Use these seven tips to get the most from your cash flow budget.