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Steering Your Business Finances: How Budgeting and Cash Flow Work Together

In my time as a CFO, I’ve learned a thing or two about what keeps a business running smoothly. It’s not just about having a great idea or a strong customer base – it’s also about getting your finances just right. Today, I want to share some straightforward talk on two things that are like the bread and butter of business finance: budgeting and cash flow.

The Basics: Planning and Tracking Your Money

Think of your budget as your plan. It’s where you write down all the money you expect to make and all the costs you expect to have. It’s a bit like a shopping list for the year ahead. But we all know what happens to the best-laid plans sometimes – they change when you’re out there in the real world.

That’s where cash flow comes in. It’s the day-to-day movement of money in and out of your business. It’s keeping track of the cash you actually have in hand to pay bills, buy supplies, or invest in new opportunities.

The Role of a Good Finance Guide

When I started in this job, I thought a solid plan (a budget) was all you needed. But I quickly saw that the real action happens when you start spending and making money – that’s managing your cash flow. It’s about making sure the money from your sales is actually there when you need it to cover the costs.

Sometimes, despite what the budget says, the money comes in late, or the bills come early. So, I’ve learned to adjust and not just stick to the plan when things change. This means always being ready to move money around to keep everything running smoothly.

Adjusting to the Real World

If you see that your cash flow – the real money you have – isn’t matching your plan, it’s time to update that plan. Maybe you’re spending too much, or maybe customers are taking too long to pay. Whatever it is, catching these things early means you can fix them before they become bigger problems.

Keeping it All Together

Keeping an eye on both your budget and your cash flow is important. It’s like having a map and a compass when you’re on a hike – they work best together. The budget sets your direction, and your cash flow tells you how you’re doing along the way.

Looking Ahead with Confidence

Drawing from my experience, I can tell you that having a good handle on both these areas will help your business stand strong, no matter what comes your way. It’s about more than just making it through the year; it’s about setting yourself up for success in the years to come.

By keeping your plan and your actual money in line, you’re making sure your business is ready for whatever lies ahead.

Here’s to smart planning and even smarter spending!

Here are a few of my favorite books that offer valuable insights into budgeting and cash flow management for small businesses:

  1. “Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine” by Mike Michalowicz
    • This book takes a behavioral approach to accounting and cash management. It’s a great read for small business owners looking to understand how to structure their business finances to prioritize profit and healthy cash flow.
  2. “Simple Numbers, Straight Talk, Big Profits!: 4 Keys to Unlock Your Business Potential” by Greg Crabtree
    • Crabtree offers a straightforward guide to financial management for small businesses. He breaks down the essentials of how to manage cash, how to read financial statements, and how to create a budget that works with your cash flow.
  3. “The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It” by Michael E. Gerber
    • While not exclusively about financial management, this book is a classic for small business owners. It addresses the importance of working on your business, not just in it, which includes understanding and managing the financials like budgeting and cash flow.
  4. “Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers” by Karen Berman and Joe Knight
    • This book offers a deep dive into financial metrics, helping business owners understand not just how to read the numbers, but how to use them to make better business decisions. It touches on budgeting and how cash flow impacts a business’s financial health.

Each of these books provides a unique perspective on the financial aspects of running a business, emphasizing the importance of balancing budgetary control with the realities of cash flow management. Whether you’re a seasoned business owner or just starting out, they can offer valuable lessons and strategies to strengthen your financial acumen.


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