Creating a Cash Flow Budget for your Small Business
At the start of a new year it is always a good idea to put together a cash flow budget for your small business especially if you do not have one for the financial year. A cash flow budget helps you see what cash your business will have available to meet expenses by recording the cash you expect to receive and pay out over a chosen period of time.
A cash flow budget is actually one of the most important management tools of your business as it:
- Helps you ensure your business meets its day-to-day commitments
- Helps you understand and plan for likely surpluses and shortages in your cash flow
- Gives you important benchmarks/ indicators of what you want to achieve
- Allows you to make informed decisions when planning additional expenditure
- Shows your bank you’re managing your cash flow and whether you can afford additional borrowings
Whilst it is possible to prepare a cash flow budget manually, it is recommended that you use a simple software package like Cashflow Manager or our cloud accounting software, which will make the task much easier.
In Cashflow Manager you are able to create a budget quickly and easily. All you have to do is go to your ‘Home Page’, open the account you wish to create the budget in and click on the ‘Budget’ tab. From there you are able to name your budget and select the month and year you would like it to start from. If you have not entered any data into Cashflow Manager and just want to set up a budget, choose ‘No Initial Data’ and click on [OK]. Your budget will then appear ready for the months and categories to be filled in.
Refer to your cash flow budget every month. Compare it with your actual results and calculate any variations, both positive and negative. This will highlight how well you are doing and allow you to take corrective action if necessary. This is very easy to do in Cashflow Manager, as there is a ‘Comparison’ button that allows you to automatically work out the difference between your budget and the actual amount entered into the cash flow section of the program.
There are more frequently asked questions about creating budgets in the Support section of our website. Click on ‘Support’ and then ‘Support Library’ for where you can select ‘Budgets’ from the drop down menu or simply type your query into the search bar.