Cash Budget

A cash budget is a financial plan that projects a company’s cash inflows and outflows over a specific period of time, usually a month or a quarter. It is a tool that helps businesses manage their cash flow by forecasting how much cash they will have on hand and when they will need to make payments or receive payments from customers.

A cash budget typically includes categories such as cash receipts, cash disbursements, and cash balances. The goal of a cash budget is to ensure that a business has enough cash on hand to meet its obligations, such as paying bills and payroll, while also maintaining adequate cash reserves.

To create a cash budget, businesses typically start by estimating their expected cash receipts, such as sales revenue, and then subtracting their expected cash disbursements, such as rent, salaries, and payments to suppliers. The resulting figure is the business’s projected net cash flow, which is used to determine the beginning and ending cash balances for each period.

A cash budget is an important tool for businesses to manage their cash flow and ensure that they have enough liquidity to meet their obligations.