Budget & Cashflow Forecasts Help Business Management

Now is a good time to review or prepare budgets and cashflow forecasts.  Preliminary work needs to be undertaken to obtain a realistic Budget and Cashflow Forecast, preferably during a meeting with your accountant. 

This involves goal setting - what are your goals for the next 12 months, including your salary, targeted profit before income tax etc? 

How is the economy likely to affect your business?  This covers interest rates, debtors' days outstanding, gold and oil prices, unemployment. 

Your business' expectations?  What do you think will happen relative to:

• labour costs?
• cost of materials?
• support from your suppliers?
• market confidence etc.? during 2012.

Sales targets - have you given consideration to the matters that have already been discussed?  What do you think is going to be your business' realistic sales performance for each week and month during 2012? 

Stock purchases – does your business have to supply stock?  Do you need to create a stock purchases budget?  This will reflect the number of days you are budgeting to invest in stock on hand.

Overhead Expenses - the start of a new year is a great time to subject the various expense categories within your business to a detailed review and questioning as to whether the expenses are necessary or whether the current suppliers are the best ones to continue to deal with during 2012. 

Break Even Analysis - what is your break even going to be in various business operations?  Are the managers/supervisors of those activities being informed of the break even calculations for which they are responsible? 

Currency Fluctuations - the Australian Dollar will no doubt continue to fluctuate during the year.  If you are an importer or exporter, should you be trying to lock in currency cover? 

"Profit" is not the same as "cash" - In the Budgets and Cashflow Forecasts prepared, you need to examine how much money is going to be tied up in debtors, stock and work in progress.  This is where a lot of your profit can end up; meaning that you don't see it in your bank account.  Could the level of debtors or stock be reduced so that you can utilise more of the profits earlier? 

Projected Source & Application of Funds Statement - it is a good idea to have a projected source & application of funds statement prepared because this will give a clearer outline of what is projected to happen in your business in the forthcoming 12 months. 

Key Performance Indicators – once the Budgets and Cashflow Forecasts have been finalised, Key Performance Indicators can then be prepared so you can have these targeted amounts in mind to compare your actual financial performance against during the year.

If you wish to discuss the preparation of Budgets and Cashflow Forecasts, please contact us.