Four good reasons why you need a cash flow budget in your business
43984, 17 Oct. 2014
Tags: cash flow budget, budgets, budgeting
If you run a business, you need to arm yourself with financial management tools – the survival of your business depends on them.
One financial management tool you need to ensure you don’t join the long list of many small businesses that fail is a cash flow budget.
Here are four reasons why you must have one.
A cash flow budget is essential because it:
1. Gives you greater control
You can make decisions based on the 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.
In addition, with a cash flow budget, you can tell you if you have enough money to pay the bills at the end of the month.
2. Gives you a target or objective to work towards
You can use targets to compensate good performance and motivate your employees.
3. Provides a means to measure your companies’ targets and performance.
Your company has goals and a cash flow budget will help you see whether or not you’re on track.
4. Helps you plan
You can make plans and decisions in advance about your cash flow.
Essentially, a cash flow budget helps manage and plan the financial spending of your business. It’s a plan for saving, borrowing and spending money.
To ensure it’s effective, involve people in the departments you’re budgeting for and remember that a cash flow budget is a living document. You must continuously update it based on experience and results from past budgets.
The bottom line: A cash flow budget is one financial management tool you can’t afford to be without. It’s an essential part of solid financial and account management. Put one in place to ensure your business stays afloat.
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