Internet business plan Budgeting Cash Flow

Budgets can be prepared for sales, inventory, purchases and expenses and, together, these form the components of a profit budget. Taken at the start of the budget period, the profit budget attempts to predict how viable the business will be at the end of the period.

However, the profit budget does not reflect the cash position of the business. This is because it contains some non-cash items like outstanding sales, debtors, outstanding creditors and depreciation. Nor does the profit budget make any allowance for capital items like the acquisition of new plant and equipment, and loan repayments.

Instead, it is the cash flow statement which assesses how much money is on hand to meet your financial obligations - what cash has been received and what has been paid out. Knowledge of this cash flow cycle will help you predict when you will receive funds and when you will require to make a payment.

For any period, the cash flow statement will include:

• The cash and credit sales (accounts receivable) expected to be received during the periods
• The anticipated cash payments (e.g. expenses for purchases, salaries, utility charges, taxes, office expenses etc).
• A description of other incoming and outgoing cash, with a calculation of the overall cash balance.