Financial Triage – Cash Flow Budgeting in Uncertain Times

The end of the year is around the corner; now is the time for business owners to take a long hard look at 2009. The fact is that every business needs a budget. According to my own anecdotal inquiries, a majority of small businesses do not budget. To make matters worse, some of the businesses that do budget will use aggressive growth forecasts. Thus, the budget's value is diminished with unreliable data. Preparing a budget is not an exact science, but many business owners can identify trends in their businesses. During these uncertain times, we are helping our clients build "bottom up" budgets, or break even budgets. We then determine the monthly break even number for the business. This sends a clear message to the business owner on what needs to be collected each month to cover expenses. Unfortunately, many business owners have no clue about their monthly break even number. They keep wondering why they have to tap lines of credit and throw personal monies into the company. If your company is in growth mode, that is one matter, but an owner shouldn't be throwing in money to cover working capital needs. Now is the time to get your arms around the course of your business. My simple advice – prepare a budget!