Profit is not cash
A company can show a profit on paper and still be unable to pay salaries on time. The reason is the gap between invoicing and collecting, plus inventory, advances and supplier payments.
The annual budget, in short
- estimate revenue by month, client or business line;
- list fixed and variable costs;
- set investments and their timing;
- compare actual figures with the budget every month.
The monthly cash-flow
Cash-flow shows, month by month, how much money comes in and goes out. We recommend three scenarios: realistic, optimistic and cautious. The cautious one shows early the months when you may need financing or to postpone expenses.
Three simple measures
- clear payment terms in contracts and weekly tracking of receivables;
- a cash reserve covering at least one month of fixed costs;
- a monthly budget review together with your accountant.
We can help you build the budget and cash-flow on your real data and track them monthly.
This article is for information only and reflects requirements published by institutions at the time of writing. It is not legal advice. For your specific situation, ask us for an assessment.
