How to monitor budgets & cash flow?
First, let me show you a brief note about budgets and cash flow and the use of both.
What is the budget?
A budget shows the detailed expected income and expenditure for a specific period for business; from that, you will also know your expected profit. It is usefully made annually, but revisions are made as and when required. If the business is stable, the easiest way to prepare the budget is to take the actual figures of the previous year and the forecast.
If you are running a business, it is vital to know How to monitor budgets & cash flow? To avoid either failure or will not grow the business for a while.
What is the cash flow?
It merely details the receipts and expenses, always done annually, but checks are carried out monthly. It is not that difficult if the business is on a cash-only basis. If not, there are still differences in amounts in the budget due to time differences in cash flow.
Active monitoring of the cash flow and the budget involves regular scrutiny, and the comparisons will make you aware of the adjusted figures and what is happening in your Company.
There is a column for actual and projected in both budget and cash flow, and at the end of each month, you are expected to fill in actuals and then make appropriate expenditures revisions if required.
If you find severe effects on the expenditure, then a complete financial record analysis is necessary.
The company faces problems because of the timing differences between income and spending. If your customer pays the bill late, say a month, you will have a cash flow problem, and then an immediate revision is required.
The people who owe you money are debtors. You would have created an amount for them in your budget and cash flow, and when they do not pay you on time, it will affect both; therefore, you need to back and change your figures in both. You must maintain proper records for your debts; if not, you might wonder how the difference between the budget and the actuals came up; you will not be aware of which customer has not paid you on time. The customers who pay you late called aged debtors, and it is crucial to maintain old debtor records to do the analysis later on when required.
Planning and monitoring your budgets and cash flow forecasts will help you identify wasteful expenditures, adapt quickly as your financial situation changes, and achieve your business goals.
How to monitor budgets & cash flow?
| Quartely Cash flow | |||||
| INCOME | Quarter 1 Quarter 2 | Quarter 2 | Quarter 3 | Quarter 4 | Total |
| Sales | 18000 | 31500 | 43500 | 45000 | 138000 |
| Capital | 35,000 | 0 | 0 | 0 | 35000 |
| – | 0 | 0 | 0 | 0 | |
| Total | 54,069 | 31500 | 43500 | 45000 | 174069 |
| EXPENDITURE | |||||
| Direct Costs | |||||
| Purchases | 20,198 | 22050 | 30450 | 31500 | 104198.3 |
| Marketing | 60 | 60 | 60 | 60 | 240 |
| Expenses | |||||
| Salary | 1,500 | 2000 | 3000 | 3000 | 9500 |
| Rent & Rates | 6,000 | 3000 | 3000 | 2000 | 14000 |
| PPS | 45 | 45 | 45 | 45 | 180 |
| Heating & Lighting | 600 | 600 | 600 | 600 | 2400 |
| Insurance | 375 | 375 | 375 | 375 | 1500 |
| Cleaning | 30 | 30 | 30 | 30 | 120 |
| Telephone | 120 | 120 | 120 | 120 | 480 |
| Bank Charges | 75 | 75 | 75 | 75 | 300 |
| Legal Fees/Accts | 2,150 | 150 | 150 | 150 | 2600 |
| VAT | – | 300 | 300 | 300 | 900 |
| Setting up | 30,000 | 0 | 0 | 0 | 30000 |
| Loan repayments | 3,150 | 3150 | 3150 | 3150 | 12600 |
| Total Outgoings | – 64,303 | – 31,955 | – 41,355 | – 41,405 | – 179,018 |
| Total Income | 60,500 | 31500 | 36000 | 36000 | 164000 |
| Net Cash Flow | – 3,803 | – 455 | – 5,355 | – 5,405 | – 15,018 |
| Opening Balance | – 21,518 | -36159.9 | -35763.9 | -27217.9 | -120659.7 |
| Ending Balance | – 32,115 | -36977.9 | -33981.9 | -23985.9 | -127061 |