Question

What is cash flow planning?

Why is cash flow planning important?

List five reasons for saving

Why do some people have a difficult time saving ?

Provide five methods for helping save?

Why do people construct a budget ?

Answer 1

1. Cash flow planning - It refers to the forcasting of cash inflows and cash outflows of a company at a future period. It involves calculations of assets and future income of the company and balancing them with the future liability. In other words, it is identifing the cash on hand and cash receivable and offsetting them with the cash payables and other liabilities. Every business should have a cash flow plan to ensure that they are appropriately balancing the cost and earnign. This helps them to forecast the expected profit.

2. Importance of Cash flow planning - There are many benefits of performing this cash flow panning. Some important reasons are.

• It helps in identifying the exact place from where the money is coming from and how it is been used
• This helps in effective use of funds. It helps in identifying whether the funds goes
• Helps in identifying the savings and to helps to make investment plannings
• Removes uncertaininty.
• Helps in taking other decision makings like tax planning, investment planning, creating provisions, etc.

3. Key reasons for savings are-

• An emergency funding is the key reason for saving of money   
• To fulfil ones needs (eg - buying a house, starting a new business etc)
• Money is saved for retirement purposes
• When the money is saved and invested in banks, it may earn some interest or returns.
• To meet daily expenses or recurring expenses.

4. Difficult time saving of money - There are many reasons for this. some of them are .

• People are much interested in living a luzurious life and in high spendings
• They dont prioritize savings
• People do not tend to track their spendings
• They are not ready to know the importance of savings
• Financial ignorance

5. Method to help savings

• Have a budget for saving. People should have this quote in thie mind  "To spend money which is left after savings and not to save month which is left after spending".
• Record each and every expenses. This helps in identifying the money which is spent unnecessarily.
• To find a way to reduce or cut cost (ex - avoid living a luxurious life)
• Select the right investing tool which gives more returns
• Set us a goal and try to achieve it.
• To develop more knowledge on savings and its importance.

6. Needs of budget.

• Budgeting helps in planning of money spendings and savings
• It always ensure to have enough money before we plan to spend it for somethings that we need.
• Remove uncertainities
• Plans for emergencies
• Helps to reduce bad spending activities
• plans for retirement benefits.