How do you keep your business income and expenditure in balance?

Running a business takes a lot of planning, especially when it comes to the financial side of things. There are times when the cash reserves of every business are put under pressure by unexpected expenses or an opportunity requiring additional budget to be freed up. To avoid a cash shortfall, it’s important to keep your income and expenditure well balanced and to set aside a buffer. How to go about that is explained below.

The cash flow plan as a starting point

Having a clear view of your company's financial situation at all times is essential if you want to keep income and expenditure in balance. Creating a cash flow plan is indispensable in this regard. To prepare one, you need to compile an overview of your incomings and outgoings each month. This shows you how much working capital or cash reserves you require in the short and long term for running and growing your business.

Tips for preparing your cash flow plan

  • Use the cash flow plan to forecast your future income and expenditure (cash flows). To do this properly, you must first list all the incomings and outgoings for the previous year and the current year. You can then use those figures to forecast your expected income and expenditure for the following year. Even though this is a projection, it still gives you an idea of how things could pan out.
  • Once you have your projected future cash flows, don't forget when the time comes to record your actual income and expenditure alongside your projected figures. This will give you a better overview of how much cash actually came in and went out, and you can use the figures for the following year’s projections.
  • Record all amounts (including VAT) each month to get the most accurate picture possible. At the end of the day, you want to know exactly how much is on your account!
  • The exact moment of payment determines the month in which you allocate income or expenses.
  • If you’re not quite sure how best to record the figures in your cash flow plan, get your accountant or financial adviser to help you.

What else can you do?

Prepare yourself for business ups and downs by setting aside a buffer. On the one hand, more difficult periods can occur at any time, so make sure you regularly set aside some money when things are going well. On the other, having a buffer in place is also a good idea should you spot a promising opportunity. You can then act quickly as you will have additional funds at your disposal. In short, a buffer provides additional flexibility within your business.

Capital tied up in stock means it is not available to be invested or to pay your suppliers on time, which in turn affects your working capital balance. Therefore, always optimise the stock you hold and, when appropriate, resist the high discounts offered by suppliers to purchase their goods. Just remember, the more stock you have, the longer it will take to shift it and earn money on it.

By reducing the amount of money flowing out of your business, you can quickly optimise your cash flow. So, take a look at where you can put off spending and where you can cut out non-essential expenses.

Consider income you can pick up in the short term, such as subsidies or grants for your business. Or take the initiative yourself and sell stock by means of commercial promotions.

Looking for a way to always keep your expenditure and income in balance?

With a KBC Brussels Business Budget Facility, you have an extra cash reserve on your business account at all times. Curious as to how it works?

Learn more