in order to manage and budget money well, you need a good idea of your gross income, expenses and net income. this is known as the 43 cash budget. the first step is in having a complete picture of your financial standing. this will enable you to determine where to spend the funds wisely.
the next step involves setting up the accounts receivable and accounts payable. accounts receivable refers to the cash that customers have paid on their purchases. accounts payable are those cash amounts that you have advanced to your customers for their purchases, direct materials included. keep track of all sales material and determine that sales have been made and which have not yet been completed. this data will facilitate you in creating a comprehensive and accurate budget.
in order to maintain a budget and save funds, identify your vendors and set aside funds equal to the total cost of your purchases minus your estimated sales volume for each month. after your inventory is set, calculate the net gain or loss. your budget will show how much you are going to earn or lose after applying your net gain or loss to your accounts payable. you should also include your gross profit margin. this will show how much profit you are earning from your business.
the final step in your 43 cash budgeting is to create your tax-deduction agenda. the first thing you do in this stage is to determine which tax bracket you are in. after that, you have to allocate the amount of deductions according to the kind of income you receive. for instance, if you receive any kind of refund, you have to subtract it from your tax liability. if you have to pay taxes on stock options and dividend payments, you have to allocate these costs to your other tax categories.
after you have completed your budget, you can easily calculate your net worth or value at the end of a month. this includes your profit as well as your total expenditure and gross profit minus your expenses. this problem is solved by the six 43 cash budgeting. in this process, you will receive an overview of your finances. if there are problems on your budget, you can immediately consult your financial consultant so that he can help you resolve your cash flow problems.
your goal in following the six 43 cash budgeting is to prepare for the changes to come. the changes in the tax brackets are based on january 1, so your budget should be updated before then. it is important to take note that the values in the six 43 cash budgeting do not always reflect real-time values. they are only estimates based on historical data. the actual values may be much higher or lower than the estimates.