Cash Flow & Budgeting Analysis

Cash flow management is imperative in operating a viable business.  Cash flow management can improve a company’s liquidity, reduce costs, and increase profitability.  Rink & Robinson, PLLC can assist you in maintaining optimal cash levels by tracking sources and budgeting according to your business cycle. To a business entity, cash flow is something that can make or break the business’ ability to survive.

A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement.

A cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.

A cash flow statement is a listing of cash flows that occurred during the past accounting period. A projection of future flows of cash is called a cash flow budget. You can think of a cash flow budget as a projection of the future deposits and withdrawals to your checking account.

A cash flow statement is not only concerned with the amount of the cash flows but also the timing of the flows. Many cash flows are constructed with   multiple time periods. For example, it may list monthly cash inflows and outflows over a year’s time.  It not only projects the cash balance remaining at the end of the year but also the cash balance for each month.

Working capital is an important part of a cash flow analysis. It is defined as the amount of money needed to facilitate business operations and   transactions, and is calculated as current assets (cash or near cash assets) less current liabilities (liabilities due during the upcoming accounting period). Computing the amount of working capital gives you a quick analysis of the liquidity of the business over the future accounting period. If working capital appears to be sufficient, developing a cash flow budget may be not critical. But if working capital appears to be insufficient, a cash flow budget may highlight liquidity problems that may occur during the coming year.

Some cash flow budgets are constructed so that you can monitor the accuracy of your projections. These budgets allow you may make monthly cash flow projections for  the coming year and also enter actual inflows and outflows as  you progress through the year. This will allow you to compare your projections to your actual cash flows and make adjustments to the projections for the  remainder of the year.

As a North Carolina consulting firm,  Rink & Robinson, PLLC extends our financial services to you, and will find any faults with your cash flow so your business can thrive.