Importance of Cash Budgeting for India SMEs - Small & Medium Industries

The Union Budget for the coming financial year may have been announced, but budgeting for companies continues year long. While a budget plan is made at the beginning of a financial year, modifications continue to take place round the year depending on various developments in the financial structure of the country.

So when it comes to SMEs, how do they go about their budgeting? For very small companies, most dealings are in cash. Hence, it is important for them to do cash budgeting before going ahead with any business transaction at the beginning of a fiscal.

In this context, Firoz Akhtar Siddiqui, proprietor of ABCL Carpets, a small-sized carpet manufacturer and exporter in Bhadohi, Uttar Pradesh, says, “As far as cash budgeting for our company is concerned, our chartered accountant looks after such matters. Besides, in order to ensure that the company’s expenses are within its planned budget, we buy raw materials after comparing prices of different vendors and checking the discounts given by them.”


Relevance for SMEs

Bizxchange further spoke to Ashok Kumar Jaiswal, senior partner at Ramesh C. Gupta & Co., a chartered accountant firm in Kolkata, to understand more about cash budgeting for SMEs. According to Mr Jaiswal, “Cash budgeting helps to forecast the cash needs and sources for a company. This is very relevant for small businesses because most of them operate with limited funds. Hence, it is important for them to estimate the cash requirements for the year at the outset.”

With 2011-12 round the corner, it is time for SMEs to make the cash budgeting plan for the financial year.