Proper cash flow and budgeting are essential for a business to grow sustainably. The problem is it takes time and expertise to do it right. If you want the benefits of budgeting and forecasting without the stress and effort, let’s talk!
Cash flow and budgets are the core of any business’s operations and finances. It isn’t something you opt into – your income and outgoings will happen even if they aren’t tracked. But, for growing companies, a reliable cash flow and budget may be the difference between success and failure. Every business should be doing this.
Unfortunately, getting it right can be time consuming, and expertise is required to turn your numbers into real strategies.
So why should you be investing in more advanced cash flow and budgeting?
Cash flow forecasting is a process where you estimate the inflows (money coming in) and cash outflows (money going out) of your business over a specific period. It is helpful when trying to predict future cash balances and identify potential cash shortages or surpluses, whilst also projecting the company’s profit, loss and balance.
Cash inflows: This includes sales revenue and receipts, loans and investments, asset sales and other types of income.
Cash outflows: This includes payments to suppliers, payroll, expenses, rent, loan repayments, taxes and capital expenditures.
How regularly a cash flow forecast is updated depends on the needs of each business. For example, rapidly growing businesses with more volatile cash flow may need weekly forecast updates, while more established businesses may only need to update them monthly. Of course, the more information you can get, the better!
Your business budget is a financial plan outlining anticipated revenue and expenses for a specific period (usually a year). This is your roadmap for managing your finances, controlling spending and tracking performance versus spend.
Budgets and cash flow are closely linked. The budget outlines planned revenues and expenses, which are then used to project cash inflows and outflows. The cash budget is a direct part of the overall budgeting process.
Budgeting is the process of planning for future revenue and expenses, while a forecast attempts to predict what will actually happen in the future based on trends and assumptions.
A cash flow projection is another term for cash flow forecast. They are essentially the same thing – a prediction of how much cash will move into and out of a business over a specific period
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