Identify potential cashflow problems

Keeping an accurate and up-to-date budget or business plan will help you manage your cashflow, by allowing you to:

• record actual figures
• compare actual figures with the budget or plan
• record any inconsistencies and investigate the reasons for them - eg a one-off, seasonal demands, changes in the economy or problems in your business that could be improved
• review whether the budget or plan should be updated

You should also consider completely new factors such as an unexpectedly large order or the arrival of a new competitor on the market, and whether these changes need to be incorporated into your business plan or budget. You might choose to:

• Keep the original budget - but measure and understand any variances in the actual figures against the original budget and new forecasts.
• Use rolling budget/forecasts - as each month's actual information is finalised, update the budget to provide an additional month's data. This means that you will always have a 12-month projection.

Whatever system you use, it is important to keep your eye on the forecasts and keep them up to date. See business budgeting.