Budget of flow of cash.

A good flow of cash, le permitirá manejar su negocio de manera segura. Understand it is essential in the management of an SME.

The cash flow budget, also called projected cash flow, It is an estimate of the amount of money that a company expects to enter and graduation and, Therefore, cash balances projected over a period of time.

This will allow us to plan the efficient use of the money, trying to keep balances that allow us to deal with future cash needs.

To plan our cash flow, We must take into account where the revenues come from: sales, Credit Collections, loans, contributions and withdrawals of capital. To make it as real as possible, We must adjust ourselves to the past experience, If you already have some time operating, or be as realistic as possible if we are starting our business.

The cash outflows can be for payments to suppliers, wages and salaries, manufacturing costs, marketing and administrative expenses, amortization of loans, etc.

What can you do with cash flow projection?

Projected cash flow helps us to predict possible surplus or deficit of cash. We can serve if you consider purchasing new equipment, preperarnos for the loan application (When is the best time to), new staff recruitment, etc.

In addition to the more realistic escenerio, is good to also consider other, as the best or worst. This will allow us to see how the business will behave if we suddenly stumbled upon hard times better than expected. Learn how this affects your ability to cash, It will give you the confidence to make more accurate decisions.

Compare revenues and current expenditures with those projected, It can help you identify areas where your business is better or worse than expected and alerts you of any variation, Thus the causes of such variation may investigate (whether it is positive or negative).

Preparing cash flow budget

We need to develop cash flow budget:

Opening balance: It is the cash with which we started the period (the week, the month, the quarter, etc).

Projection of sales & receivables: estimate sales for the period and fees per credit sales. Use your recent sales history 2 years to give an idea of the level of sales you can expect. If a business is started, based on information from their suppliers, a study of market, Government statistics on the category of your business or in the performance of similar businesses.

Projection of costs: their costs are composed of fixed and variable costs. Fixed costs are those that are paid monthly and do not depend on the level of sales: rental of local wages, etc. Variable costs are those that depend on the level of sales: manufacturing costs, shipments, etc. It is important to also identify other costs such as payments by accounting, taxes, amortization of loans,etc.

With this information, You can prepare your cash flow budget. It is important to check every month and compare it with the actual results. The same, make adjustments in all your budget if necessary. With this, we ensure that the cash flow budget stays as close as possible to reality.

A simple example of a cash flow budget is shown below:

Note that the final balance of one month is the beginning balance for the next month.