Glossary

Cash Budget

A cash budget is a forward-looking projection of a company's anticipated cash inflows and outflows during a specific time frame.

What is a cash budget?

A cash budget is a forward-looking projection of a company's anticipated cash inflows and outflows during a specific time frame. This helps stakeholders in the organization to make strategic decisions.

How to calculate a cash budget?

Calculating a cash budget involves tracking expected cash inflows and outflows for a defined period. Expected inflows include sales revenue, interest income, and vendor payments, while outflows may encompass expenses like employee salaries, inventory, operational costs, and utilities.

What is the difference between a cash budget and a profit and loss statement?

‍A cash budget anticipates a company's future cash inflows and outflows within a specific period, providing insight into its actual cash position compared to budgeted amounts. In contrast, a profit and loss statement, also known as an income statement, reports a company's revenue generation and expenses incurred during a specific period.

Who utilizes a cash budget?

‍Businesses employ a cash budget as a financial forecasting tool to project their future cash flow. This tool aids businesses in identifying and monitoring cash sources and uses, facilitating decisions on effective cash management. Cash budgets are typically applied in short-term contexts, such as the early stages of a new business or leading up to major purchases or investments.