Balance Sheet Projections-Operating & Cash Flow Budgets
Balance sheet projections and Operating and cash flow budgets are essential for
financial planning. The balance sheet projections and operating and cash flow budgets
should consist of established performance benchmarks identified by management as
being critical to the success of the business.They should be prepared at least annually
by month and compared to the actual results both monthly and year-to-date. The projections
of the balance sheet items should be derived based upon the performance established
in the operating budgets and the established benchmarks in operating asset utilization.
The cash flow budget is derived from the results of the operating budgets and the
established asset utilization ratios imbedded in the projections and budgets. The
cash flow budget provides management with information concerning the liquidity of
the business throughout the plan’s duration. This enables management to acquire
funding to support their plan at the lowest opportunity cost.
Projection and budget variance analysis is performed to assess the causes of deviation
from the projections and budgets. This process directs management to operating systems
and processes that are deficient and in need of corrective measures. Identifying
and correcting deficiencies quickly reduces inefficient use of capital, reduces
cost and increases both profits and free cash flow.
If prepared properly the balance sheet projections and operating and cash flow budgets
will equip management with the necessary data to administer the cash and liquidity,
short-term investment, balance sheet and working capital management programs effectively,
therefore enhancing profits and creating value for the organization.
- Does your organization prepare operating and cash flow budgets?
- Does your organization forecast cash flow?
- Are you applying the best practices in managing the balance sheet and working capital?
- Do you have the right cash management system and processes?
- Has your organization established written policies and procedures regarding investment
of surplus cash?
- Does your organization have a formal plan identifying weaknesses in operations and
mechanisms in place for the quick execution of a correction plan?
- Is the financing and capital structure of your organization adequate?
If you answered no to any of the above questions, or you are uncomfortable with
your operating and cash flow budgeting programs, Alan Neal & Associates is positioned
to assist you. To learn more about how our value-added services can provide value
to your organization, contact:
Alan Neal & Associates, Inc.
240 Forest Avenue Suite 202
Chattanooga, Tennessee 37405
Phone: (423) 756-4076
Fax: (423) 756-4085
advisors@alanneal.com