Financial Management in the Small Business

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FIN/375: Financial Management in The
Small Business

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Table of Contents
Potential benefits and pitfalls of cash flow budget....................................................................3
Expected business expenses and sources of revenue.................................................................3
Income statement, balance sheet and cash flow statement........................................................3
Adjusting cash budget to manage contingencies.......................................................................4
Difference between operating and cash budget.........................................................................5
Importance of budget variance analysis.....................................................................................5
Recommendations......................................................................................................................5
References..................................................................................................................................6

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Potential benefits and pitfalls of cash flow budget
The cash budget is important as with this cash balance will be maintained and all the
obligations of the business will be met on time. The amount which is required to be borrowed
or is in excess is ascertained with the help of this. There is a difference in the cash balance
and profit and that is a disadvantage (DeFranco & Schmidgall, 2017). By this strategic
objectives will be attained as the cash will be retained to be used in an emergency. With the
help of this, the adjustment for the difficult times will be made which are involved in
planning. The revenue will be increased by 10% by including all the expenses and labour cost
which will be incurred in the making of budget.
Expected business expenses and sources of revenue
In the business, there will be various expenses that will be involved such as the labour
cost which will be incurred on a per hour basis. The variable expense will be involved in
which material and labour and other overheads will be considered. There will be a need for
the marketing of product and that will also be considered in cost. The fixed expenses will be
incorporated for rent and other charges which need to be considered in calculating the total
cost.
The funds will be available from various sources and in that main will be the sale
which will be made and the amount which will be collected is a fund for the business. The
shortage which will be faced will be met with the help of borrowing that will be taken from
online national bank.
Income statement, balance sheet and cash flow statement
Income statement
Particulars Amount
Sales $1,20,000
Purchases 1,12,500
Gross profit $7,500
Rent, insurance and others 3,000
Wages 12,000
Net profit ($7,500)