Cash Budget

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Cash Control and Cash Budgets

Budgeted Income Statement and Budgeted Balance Sheet

What is a Budgeted Income Statement?

An estimate of expected revenues and expenses for a business, over a specific time period i.e. 1 year, 1 month or a specific event.

What is a Budgeted Balance Sheet?

An estimate of a business's financial position (assets, liabilities and owners equity) which can be produced for both the start and end of a period of time (i.e. a year) or for a special event when preparing a business plan.

What is a Cash Budget?

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A report of the expected changes in the cash position of a business over a period of time (i.e. a year) or over a special event. It includes an estimate of expected cash receipts (cash flows in) and expected cash payments (cash flows out) along with a running cash balance.

A Cash budget reflects whether the entity is expected to generate sufficient expected cash inflow to meet expected cash outflows as they fall due.

Expected cash inflows include:
- cash revenues, receipts from debtors (from accounts receive bale) and other receipts (i.e. long term loans, bank overdrafts and additional funds put inot the business by the owners)

Expected cash outflows include:
- cash purchases of inventories or supplies, payments to creditors (i.e. suppliers or lenders), payment of wages, cash expenses, cash outlays for the purchase of non current assets (i.e. purchase of kitchen equipment), including loan repayments and cash drawings (drawings is money taken out of the business by the owner) [pic]

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Effective Cash Management includes:

• Efficient cash collection of accounts receivable (trade debtors) to maximise cash generation from sales and minimise collection costs such as bad debts and the need to obtain bridging loans such as bank overdrafts to cover cash shortages. • If cash is not in short supply - pay trade creditors early if they offer discounts for early payment....
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