There are many keys to running a successful and profitable business and three we want to focus on are cash flow, budgeting and planning. These three tools are integral in the management of your business as they assist with the strategy, financial management and review of your business performance. So how do they work? We explain more below.

Budgeting

Putting time into creating budgets for your business ensures business owners will have greater control and transparency around its financial position. Budgeting sets a plan in place, often in advance, to balance your expenses with your income and enables you to proactively respond to any change in business performance when required. For example, if your business is not meeting income targets, then additional resources such as a marketing budget could be used to improve the situation. Alternatively, if costs are too high in certain areas, measures can be introduced to control or lower these expenses.

Cash Flow

A lack of cash can be one of the biggest reasons small businesses struggle so for business owners its essential to know exactly how your cash flow is impacting your business. To break it down further, a positive cash flow means more cash is coming into the business than there is being spent, while a negative cash flow means more cash is going out than there coming in. A negative cash flow is a cause for concern for many reasons as it can impact business longevity if expenses such as wages, rent and supplier costs etc are not covered. Starting up a business is often one of the more difficult times to manage your cash flow, but strategies are available to best manage this type of situation and ensure your business maintains a positive cashflow situation.

Planning

Forecasting might sound similar to budgeting, but the difference is forecasting is an estimation or expectation for the future results of your business. Forecasting is often strategic and can assist businesses in realising their growth plans and accountant’s play an important role in helping business owners understand their numbers so they can go ahead and make big decisions confidently for their business.