Budgeting & Cash Flow Management for Small Businesses

Ameet is a competent multitasker with a creative bent of mind and expertise of driving the team and the business coherently, with over 16 years in aligning with business for results and profits through effective Team & Distribution Network Management.

In India, small businesses play a crucial role in the economy. They contribute significantly to the nation’s GDP and have a prominent role in supply chain. Over the years, small businesses have grown remarkably in India, especially during the onset of COVID-19. However, this market still lacks organisation, be it, finances or inventory, this problem needs to be recognised. Budgeting and cash flow management are two ways to improve the functioning of a business irrespective of this problem.

To remove the bottlenecks in MSMEs, we must acknowledge that the lack of smooth access to credit and liquidity is a huge problem, as it upsets the supply chain. There are around 63 million small businesses across India, but this sector is facing trouble when it comes to borrowing funds. Fintechs can help there. Fintech companies are able to issue shortterm, small ticket loans and modify their solutions to match the cash flow needs of MSMEs because of their technological and digital skills. The unification of digitisation and analytics is also helping fintechs develop state-of-the-art lending models. This can aid in meeting the financing requirements of small businesses. Also, in the lack of a credit history, cash flowbased lending enables the advancement of loans to MSMEs by assessing real time cash flow data.

Budgeting is not a one time activity, but rather a process. Creating a budget is important because it pinpoints available capital, evaluates expenses & anticipates revenues

Meanwhile, the government has some measures in place to solve this problem. Even with help from the government and fintech firms, MSMEs need to improve their internal operations and make sure they’re doing what’s necessary for their growth. A small business heavily relies on its budgeting, and it is important that it takes into account the ongoing operations or unforeseen circumstances. In the same way, managing the inflow and outflow of cash is of utmost significance because it helps businesses recognise where they are lacking.

Preparing a budget is one of the most important things you can do for your business. By doing so, a business can plan activities and set up financial goals. For businesses, especially a small business, budgeting is not a one-time activity, but rather a process. Creating a budget is important because it pinpoints available capital, evaluates expenses and anticipates revenues. The success of a small business depends on its ability to plan ahead of time. Why do they need to do that? To gauge any financial needs that may arise and to plan their day-to-day operations. A budget can help your business be prepared for emergencies by setting money aside, so you don’t have to use money from other business operations instead. It can also help you make large financial decisions, such as a change in salaries of your employees, benefits you can offer them and more.

It can be said with certainty that for a business, Cash is King. No matter how profitable a business is, if they don’t have enough cash, they can’t run their operations smoothly. It is obvious that cash coming in is good for a business, especially a small business, while unexpected cash going out is a cause of worry. This is where cash flow management comes into picture.

Through cash flow management, you'll get a clear picture of how your business is doing. It will help you identify where you are at and give you the opportunity to refine your business. Of course maintaining all financial statements is necessary for a small business, but keeping a cash flow statement will make sure you’re in tune with the well-being of your business. Managing cash flow involves identifying business risks and preparing in advance for eventualities.

You need to consider multiple scenarios such as “What if that big order suddenly comes in?”, “What if a big order is cancelled?” as a form of risk analysis. As a business, it is important to stay on top of your expenses and grab costcutting opportunities. Many businesses don’t manage their cash out flow, which affects their business. Small business owners ought to follow a budget and take adequate measures to maintain their cash flow. A budget can help them predict cash flow and run operations smoothly. Also, without cash, profits are meaningless. So, it’s safe to say that cash flow and budget go hand in hand and it is necessary to take appropriate measures around both to float a business.