Business Budgeting, Cash-Flow Management & Financial Ratios
How to prepare a business budget, build a cash-flow forecast, control costs, and analyze financial ratios.
Budget vs Forecast vs Financial Statements
A budget is an approved forward-looking financial plan. A forecast is an updated expectation based on current data, while financial statements report historical results. Management should use all three for decision-making.
Building a Cash-Flow Budget
Start with opening cash, add expected customer collections, and subtract supplier payments, payroll, rent, taxes, and capital spending to calculate closing cash. Update regularly and test best-case and worst-case scenarios.
Variance Analysis, Break-Even & Key Ratios
Compare actual results against budget monthly to investigate material variances. Monitor gross margin, net margin, current ratio, receivable/payable days, and break-even sales volume to support pricing, hiring, and cost control.
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