CASH FLOW STATEMENTS
by Applegate Accountants, Cheshire

Why bother with cash flow statements? Because the Profit and Loss shows profitability and the balance sheet shows asset strength. While these two financial statements give a great deal of information on the progress of a business during an accounting period, profit does not equal cash, and strength in assets does not necessarily mean a large bank balance.

A Business which fails to make profits will go under in the long term. However, a business which runs out of cash because it does not measure its cash flow statement, even for a couple of months will fail, despite the fact that it is basically profitable Cheshire business.

Cash flow statements forecast that sufficient funds will be available when they are need to sustain the activities of a business.

Cash flow forecasts provide an early warning of liquidity problems, by estimating how much cash is required, When cash is required, How long the cash will be required for, Whether cash will be available from the anticipated sources.

A business must know when it might need to borrow and for how long, not jus what amount of funding could be required.

Banks have increasingly insisted that customers provide cash flow forecasts as a precondition of lending. A newly established business wishing to open a bank account will normally be asked to supply a business plant. The cash and sales forecasts will also allow the bank to monitor the progress of a new business, and so control its lending more effectively.

Applegate & Co will prepare cash flow forecasts in the correct formats that the banks require, by dealing with local banks and using there specific software. We can also provide monthly statements in conjunction with your monthly book-keeping requirements. Keeping on top of cash flow is a must.

BUDGETING

Cash Flow Statements Cheshire A budget is a financial plan for a business, prepared in advance.

In any business the budget will provide the mechanism by which the objectives of the business can be achieved. In this way it form a link between the current position of a business and the position that the business is aiming for.

By using a budget firstly to plan and then to monitor your business, you can ensure that your business's progress is co-ordinated to achieve the objectives of the business's. The benefits and purposes of using budgets are as follows:

The Budget compels planning- by formalising agreed objectives of the business you can ensure that your plans are achievable. You will be able to decide what resources are required to produce the desired outputs, and make sure that they will be available at the right time.

The Budget communicates and co-ordinates- Because a budget is agreed by a company, all the relevant employees will be working towards the same ends. During the budget setting process any problems should be resolved and any areas of potential confusion clarified.

The Budget can be used to monitor and control - An important reason for producing a budget is that management is able to monitor the actual results against the budget. This is so that action can be taken to modify the operation of the business as time passes, or possibly to change the budget if it becomes unachievable.

The budget can be used to motivate - A budget can be part of the business techniques for motivating managers and other staff.

CASH FLOW STATEMENTS by Applegate Accountants, Cheshire

CASH FLOW STATEMENTS
by Applegate Accountants, Cheshire