Should Your Small Business Use a Cash Budget?

Written by Charles P Myrick CPA | 4/26/16 12:30 PM

At some point, every small business owner will need to make an important decision: should they use cash or accrual budgeting for their company?

There are advantages and disadvantages to both of these options, and you should consider talking with an accountant to learn about how these methods will impact your business.

What is a Cash Budget?

When you use cash budgeting, the finances are managed to look at the facts: how much money are you bringing in and where is it going? By estimating the outflows and inflows of the company - using cash flow projections - you can determine if the money is being used productively. You will be able to make business decisions based on the cash position of your company.

Implementing a cash budgeting system for your company will allow you to determine the amount of available credit before you begin running into liquidity problems.

Benefits to Cash Flow Management

When you implement cash budgeting for your company, you will experience many benefits in your business:

Managing cash flow will give you an overview of expenditures so that you can determine if the money is being spent in the best way possible.
Cash budgeting creates more financial awareness in the company. Many business owners find that they can make better financial decisions with they have the information available about the inflows and outflows of cash in their company.
A CPA can help you with cash flow projections and forecasts to identify how much is available. Cutting unnecessary costs allows you to save money that would be spent on frivolous things.

Are you interested in learning more about implementing a cash budgeting system in your small business? Contact Charles Myrick CPA to learn more about the accounting services that we offer: (202) 789-8898

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