A set of financial data from these accounts is used by management for their decision making that will affect the company future. They are usually prepared on a monthly basis.
Cash is important for day-to-day running of business. Without cash businesses can become insolvent. Businesses with liquidity problems are unlikely to survive. Cash flow is a moving or flowing of money in and out of a business. Cash flow projections are therefore one of the tools used by managers to learn when to borrow due to cash shortages or to invest with cash surplus to earn extra income. The goal is to make sure that their business has sufficient funds to survive.
Budgeting is a plan to spend the money. A budget is used by managers to monitor, prioritise and control their spending so that cash is spent on the most important thing first. Actual spending will be compared with the budget. An over budget spending should be closely scrutinised.
This is an analysis of deviations from budget of actual amounts. High deviations need close attentions from management. Both revenue and expenditures can be analysed. There are 2 types of variances:
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