Projections & Budgets

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

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