What Does a Budget Analysis Do?

August 10, 2018

A budget analysis details the cash flow into and out of your business for a given time period, often a month. Conducting this type of study allows you to ensure that you have cash available when needed to make purchases and pay bills. Encino payroll and accounting firm Wallace & Associates can analyze your business budget to maximize your positive cash flow.

Steps to Complete a Budget Analysis

Business owners can follow a few simple steps to prepare a budget analysis.

• Figure out how much cash your business will bring in for the month in question. This includes the cash balance in your business accounts at the start of the month along with projected cash and credit sales.
• Determine the expenses that must be paid during the month. This includes office supplies, advertising costs, payroll expenses, debt payments, taxes, and equipment, along with any other business-related purchases you plan to make.

Purpose of a Budget Analysis

The budget analysis should indicate that your business’s projected monthly income is greater than your monthly expenses. Completing this calculation each month can help you reach your business’s financial goals. It can also show you when you need to cut expenses, increase income, or borrow money to keep your business viable. Negative cash flow is not sustainable in the long term.

When done consistently, the budget analysis is a critical component of your business’s short-term financial forecast. Los Angeles accounting professionals can help you develop an overall forecast that can be presented to investors and stakeholders and used in your business’s official financial reports.

If you plan to apply for business financing, the financial forecast will be reviewed by the lender. In addition to the budget analysis, this includes an income statement and balance sheet.

Wallace & Associates offers Encino company payroll services and financial consulting. Contact us at 818-995-2928 for a free initial appointment about your business analysis needs.