Do you know where the money in your business is coming from and where it is going? Do you know how well your receipts are being collected? Is your company performing as expected? Are you meeting your goals?
These are questions every self-employed business person should have answers to … especially during a recession. A budget coupled with a monthly cash flow projection are two financial tools that can help you answer yes. These two tools can help you keep track of your income, expenses and profits, and alert you to trouble before it strikes.
A budget is simply a projected report of where your money is coming from (income by source) and where it’s spent (expenses). A cash flow statement shows you how much money your business is really making and allows you to analyze the cash inflows and outflows during a specific time period. It helps you calculate future expenses to make sure you will have money to pay your bills.
If you are just starting out, many of the actual numbers are probably unknown In such a case, you can create a spreadsheet with one column for anticipated cash flow and another column for actual numbers. Over time you will have enough actual financial information to make your anticipated column more accurate.
Okay, that sounds good, you say, but exactly how do I create this budget and cash flow projection? If you have a bookkeeper taking care of all your financial records for you, ask them to prepare the budget and cash flow report for you.
For those of you who truly “wear all the hats” and just need something simple to start out with, check out the sources below:
Articles:
How to Prepare a Company Budget
Meet The Cash Flow Statement by Motley Fool Staff
How to Create A Zero-Based Budget and Budgeting on A Self-Employed or Irregular Income
How To Make Your Business Budget Work
Is it important to prepare a budget for my new micro-business? How do I create one?
Do you know where the money in your business is coming from and where it is going?
Note: The information provided is for informational purposes only. I am not engaged in rendering legal, accounting or other professional advice.
