Cash Flow – Why timing is important!
You are busy either growing your business or getting it ready to go. You know you will need a cash flow budget eventually. But why do you need to do one now? Learn more in this week’s blog.
You know the drill. You are busy running your business or getting it ready to go. You have a lot of things to get done. You know you need to work on your budget, buy why now? It has waited this long, can’t it wait a little longer?
When we get busy or stressed, we often do the tasks that we like to do first. Most small business owners are not in the accounting business, so doing a cash flow budget gets in that “I’ll do it later” pile.
But there are several good reasons not to do that.
A cash flow budget will show you the ups and downs of your money coming in. Rather than having to deal with a cash shortage in emergency mode when it comes up, you want to deal with it calmly and as far in advance as you can.
When you know you are going to have a lean time coming up in the future, you can do something that will resolve it. You can adjust your expenses so you spend less or you can bring in some extra revenue to cover the shortage. Sometimes it is a combination of both. But you can’t do either of those things when the situation is upon you. Then it is too late and you are left to try and figure it out on the fly.
A cash flow budget helps you make better decisions. You have some extra money right now and you are not sure if it is a good time for you to purchase some equipment for your business. You have the money. But is it the right time to spend it?
Your cash flow budget, in conjunction with your operating budget will show you if there is a reason that you have that extra money right now. It could be that you have an annual payment coming up that those funds are supposed to cover. If you buy that equipment now with the money you should be saving for that annual payment, you are headed for a cash crisis.
When that annual bill arrives, you will suddenly be reminded what that money was for. You could have avoided the crisis by looking at your cash flow budget when you were deciding what to do with that money.
A cash flow budget will help you spend your money more wisely. Let’s go back to our equipment example. You need that new equipment, but don’t have the money right now. You never seem to have enough money at one time to be able to make that purchase. By using your cash flow budget, you could see that you have three or four months where you are projected to have some extra money. No single month allows you to make the purchase. But when you put several of them together, you are able to put enough money aside to cover what you need to purchase.
Without your cash flow budget, you may not have seen that. Because the individual amount was not enough to get the job done you spent it on something else. But your cash flow budget allowed you to see how it could be done.
You can see that the timing is important. By looking ahead with your cash flow budget, you can avoid emergencies, make better decisions and good plans. Take the time to get your cash flow budget done!
1. Business Person: You are either running your business or getting it ready to go. Here is what you need to know.
2. You have some money to spend - but is it really a good time to spend it?
3. How to avoid a cash crisis in your business.
4. When no single month allows you to make an equipment purchase, here's how to solve the problem.
5. Learn how Cash Flow budgets help you make better business decisions, avoid emergencies and carry out good plans in your business.
To learn more about cash flow and budgeting, sign up for my upcoming free online Cash Flow Workshop HERE. I will email you when the next workshop is scheduled to begin as well as sending you a link to each new weekly post in the Budgeting Essentials Blog!
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To learn more about cash flow and budgeting, sign up for my upcoming free online Cash Flow Workshop HERE. I will email you when the next workshop is scheduled to begin as well as sending you a link to each new weekly post in the Budgeting Essentials Blog! I will be teaching my Cash Flow Workshop soon, so don’t miss it!
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© 2019 Dan Heiland 2019 Kat Heil, LLC