It may be hard to believe, but we are fast approaching the end of the first third of the year. That’s right, 2018 is well and truly underway. Footy season is in full swing, the leaves are starting to fall, and the temperature is dropping.
So, with the start of the new financial year just around the corner, if you have a business it is also time to start thinking about your financial plans. It’s time for expenditure reviews, budget preparation, and cash flow forecasting.
First things first, what is the difference between budget preparation and cash flow forecasting?
While both of these factors are vital for the success of your business, it is incredibly important to understand the distinction between the two.
Budget preparation involves looking back at your expenses for the past financial year, and deciding on estimated expenditure for the next twelve months based on those gains and losses.
Cash flow forecasting is concerned with what you think you will earn during the year—what you expect your income to be, and what the timing of it will be.
How should my business utilise budget preparation and cash flow forecasting?
One influences the other, and not necessarily in order. You may establish an initial budget preparation, but once the cash flow forecasting has been done, you may need to go back and adjust the budget—and vice versa.
How does my business determine the numbers of budget preparation and cash flow forecasting?
With regards to budget you should be able to work from last year’s budget. If you are starting a new budget you will need to do some serious research and number crunching to arrive at an estimate for how much you think your business will need to get through the financial year.
As far as the cash flow forecast goes, you will need to look at every source of cash ‘inflow’ you may have, such as income, rebates and refunds, royalties, grants and investments. The sum total of these estimations will give you an idea of your cash flow forecast.
Where can I get help about budget preparation and cash flow forecasting?
Where else of course? At Mead Partners, we’re specialists in helping your business plan for the new financial year.
We have the expertise and the tools to make this easy for you. We can provide detailed three-way forecasts (Profit and Loss, Cash Flow, and Balance sheet), in a straightforward and understandable report, which you can then use to monitor the performance of your business.
Our systems are reliable and proven. They ensure all of your forecasts and budgets are accurate—and they can be implemented as an ongoing document to allow updates if your circumstances change over the course of the year.
Call Mead Partners on (03) 9523 2277, or send us a message here and we’ll get back to you.