1. Calculate your break-even analysis. The budget process begins with a break-even analysis, the equation that shows a business' base cost to provide its product or service. Due to the uncertainty of revenue, businesses must keep fixed cost to a minimum, and manage the variable cost closely. Most business owners are preoccupied with covering daily expenses and making payroll, and fail to perform this analysis, exposing their businesses to undue risk.
2. Re-evaluate fixed expenses. The fixed expenses normally represent the largest expenditures from a company's cash flow. As a business owner, you should second-guess your fixed expenses to see where savings may exist. Be certain the fixed costs are commiserate with revenue levels, and scrutinize all variable costs to death.
3. Review financial status monthly for tax purposes. Review your financial statements monthly in order to know the tax liability incurred and include this liability into the cash flow forecasting schedule.
4. Know your business and know your customers. Knowing your customers' payment habits is the key to producing a good cash flow forecast. When forecasting the in-flow and out-flow of cash, things rarely - if ever - go exactly as you plan. But, the better you know your business and your customers, the more accurate your forecast will be.
5. Evaluate variable costs at least every six months. You should regularly evaluate or audit variable expenses, such as office supplies, for necessity.
2. Re-evaluate fixed expenses. The fixed expenses normally represent the largest expenditures from a company's cash flow. As a business owner, you should second-guess your fixed expenses to see where savings may exist. Be certain the fixed costs are commiserate with revenue levels, and scrutinize all variable costs to death.
3. Review financial status monthly for tax purposes. Review your financial statements monthly in order to know the tax liability incurred and include this liability into the cash flow forecasting schedule.
4. Know your business and know your customers. Knowing your customers' payment habits is the key to producing a good cash flow forecast. When forecasting the in-flow and out-flow of cash, things rarely - if ever - go exactly as you plan. But, the better you know your business and your customers, the more accurate your forecast will be.
5. Evaluate variable costs at least every six months. You should regularly evaluate or audit variable expenses, such as office supplies, for necessity.
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