The Economic Implications of Budgeting and Cashflows

It is a new decade; the year is still fresh. You, as a business owner, are wondering how much financing you will require this year? Where will the money come from, how will you spread it across the quarters?

In the UK, the economy prediction scheme unfamiliar to many. You find that in most cases, businesses exposed to an economic slump will start to experience changes in their trading activities and as a result, a revenue decline. Most business owners start up their business ventures with great optimism and enthusiasm. However, without a well-thought plan of action, it can be a daunting experience.

2021 OBR’s growth prediction could be lower than the 2020 projections. To keep your business afloat, Ernest & Co Accountants seeks to help you manage your business in these tough economic times by strengthening your financial position.


This article explains how budgeting and cash flow systems can work wonders for your business.


What is a Budget?

Simply put, it is a conjecture of revenue and expenses for a specified period in future. Users of budgets include corporations, the government and households. It works as an integral part of the daily operations of a business.

An apt budgeting system for companies serves as a design model for managers and the reconciliation at the end of every financial year.

The budgeting process for a company is not a walk in the park, especially if the flow of income is intermittent. Our team of professionals can help you select the best type of budget in line with the kind of business you operate.


What is Cash flow?

It is the measurement of the sum of cash that comes in and out of your business at a specified period. A conclusive cash inflow and outflow in any business is listed in a cash flow statement. It describes the cash flow that occurred in the past. A cash flow projection stipulates the sum of cash expected to be generated or spent by a business entity over a specified time.

A good cash flow forecast might be the best thing to ever happen to your business. Cash flow is utterly not profitability. A good number of business people tend to confuse cash flow with profitability. Though closely related, they are different. That is where Ernest & Co Accountants come in to ensure you get a positive cash flow.

Okay, I know what you are thinking, but yes! You have seen big companies crumble because of money problems. Our team of certified accountants can help you manage your cash flow with ease.


Why is Budgeting Important to a Business?

  • It curbs uncontrolled spending. Spending limits tend to regulate department managers spending habits.
  • It motivates employees by instilling a quantifiable goal hence focus.
  • It works as a quality assurance for stakeholders/investors.


Significance of Cash flows to a Business

  • It enables the business to offset its debts.
  • A negative cash flow is a red flag; indicates that the business’s liquid assets are depreciating.
  • A positive cash flow ensures returning of money to respective shareholders, offset company expenses and growth of the business.


Bottom line. Our qualified and approved team of professionals is a phone call away, ready to solve all your budgeting and cash flow troubles.


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