Budgeting & Cash Flow Management

A budget is an estimation of revenue and expenses over a specified future period and is usually compiled and re-evaluated on periodic basis. Budgets can be made for a person, a group of people, a business, a government, or any other entity that makes and spends money. This allows a business to see if it will be able to continue operating at their expected level with projected incomes and expenditures. A budget is drawn up for a financial year and contains information about anticipated sales and associated business costs within that period. By using budgeting, a business predicts how well it will perform over the course of a year so that actual performance can be weighed against the original plan.

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Whether you are a limited company, owner of a start-up, a decades-old family business, a newly migrated immigrant to the UK, a fast-paced contractor, or a landlord, Lanop’s team of highly professional chartered accountants and financial consultants will provide unique advice to your specific budgeting and cash flow issues. So that you can forecast better and garner more profit.

There 3 main types of budgets:

1. Balanced Budget

In case of a balanced budget, the estimated expenditure is equal to estimated revenue in a given financial year. Many economists believe that a business’ expenditure should not be higher than its revenue. While this is an ideal situation according to economics, attaining this can be quite a task for anybody.

2. Surplus budget

A surplus budget is one where expected revenue surpasses estimated expenditure in a specific financial year. This implies that a business’ earnings are greater than the amount spent.

3. Deficit Budget

A deficit budget is one where estimated expenditure exceeds projected revenues in a set financial year. You need to look for sources of funding in this instance to support your operational and capital expenditures.

Cash flow can be defined as the net sum of money left after deducting all expenses from income. Cash flow management is the processing of tracking and recording a company’s income and expenses. This helps to predict how much money will be available to a business in the future. Also, it helps to identify how much money a business needs to cover liabilities, like paying employees and suppliers. It pays to practice cash flow management often to make sure your business has enough money to keep running.

Types of Cash Flows

These are the types of Cash Flow:

Negative: Most goods and serviwhere expenditure is greater than income
Positive: where income is greater than the expenditure
Neutral: where income and expenditure are equal

No matter what you sell, whether it’s products or services, cash flow management is usually the difference between success and failure. But while staying out of the red may be a priority, late payments and bad debts from customers could seriously damage your finances – impacting your ability to pay suppliers and secure credit. Reducing the risk of any cash flow problem is fundamental to a business. However, with difficulties that the Covid-19 pandemic has brought, even the most reliable customers may struggle to pay on time and in full.


All business owners want to avoid cash flow problems. However, due to their size and ability to access financial resources, SMEs are often disproportionately affected by negative cash flow. Where a larger business may have funds available as a stopgap between late payments, smaller businesses rely more closely on their predicted monthly income to ensure financial commitments are met. In serious cases, business owners can be left with no choice but to use personal funds to keep their business afloat. For ambitious businesses looking to grow, long term negative cash flow can put these plans on hold. Instead of investing time and energy into growth, business owners are left scrambling to stay afloat month by month. It’s no wonder research by QuickBooks found that 71% of small business owners have lost sleep worrying about the cash flow of their business.

Lanop Accountants eliminates the need to search for an all-encompassing accountancy firm. Our corporate headquarters in Putney, London provide practical and efficient solutions to all your accounting needs.

Our skilled tax and finance professionals work diligently to make your life simpler by reducing financial stress and making business models more lucrative and efficient in accordance with up-to-date regulations.

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