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Page 5 of 10
Budgeting
4. Balance Sheet Projections
While you are working on budgets, calculate the effect of meeting them on your assets and liabilities.
4.1 This will provide you with an internal check on their consistency.
4.2 It will provide you with management information.
- For example, it will show how much you are likely to be owed by customers at the end of the period, or how much you are likely to owe suppliers and HM Revenue & Customs for VAT and PAYE/NIC.
4.3 It will provide financial information for prospective backers.
- For example, your bankers will need information on your prospective balance sheet before they decide to lend to you.
4.4 It will focus your mind on the need for capital spending.
- It will show the impact of depreciation on the balance sheet value of new cars, equipment and other fixed assets.
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