Why your business needs an accurate and functional cash flow budget
My friend's been running her business for just under 2 years now. She's always finding it hard to meet her financial obligations. At the end of every month - on paper, the business has made a lot of money. But in reality, she's struggling to pay for her expenses. So she was thinking of closing her business.
I asked one of our writers at FSP to have a look at her company's financial records. It took just under 30 minutes to find out that she wasn't managing her cash flow properly. So because of this, she was never able to identify any potential cash flow problems, nor prevent them.
This is why I'm writing to you today. If you run a business, you must have functional cash flow budget. Read on as I let you in on why this is so important.
The slightest discrepancy in your cash flow budget can result in you not knowing if your business is over performing or underperforming!
This is why you need a solid financial budget for your business.
I have just the tool for you…
What is a cash flow budget?
It's an estimate of all cash receipts and payments you expect to take place during a certain period. And it's an essential part of solid financial and account management.
Your cash flow budget can show you if you have enough money to pay the bills at the end of the month. It's a short-term financial management tool you need. Without it, you won't be able to identify potential money problems in your business.
So follow these 13 steps to set up your comprehensive cash flow budget
. And revise and revisit it regularly to make sure your plans are up-to-date.
Read on to find out why you need a cash flow budget...
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A simple excel spreadsheet alone won't help you budget effectively!
You need to know how to:
Use all the Excel formulas correctly;
Enter data using forms;
Remove and multiple subtotals;
Use PivotTables and more…
That's why Excel Guru and certified Chartered Accountant Adrian Miric developed the Practical Guide to Excel CD
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4 Reasons why you must have a cash flow budget
1. It gives you greater control
You can make decisions based on expected outcome of events. For example, if you see debtors don't pay within their 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. Set the targets to levels where you know you'll be able to meet and exceed all financial obligations.
3. It provides a means to effectively measure your companies' targets and performance
How else will you know your company is profitable? Or even if it's a viable venture to continue with, unless you can measure the performance.
4. It helps you plan
You can make plans and decisions in advance about your cash flow. For instance, if you see you will not have enough money to pay your expenses, negotiate better payment terms with your creditors.
For a template of a well thought-out cash flow budget and 9 other budgets that will make your budgeting tasks a breeze, simply follow this link.
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