What does a cash budget include?

A cash budget is a financial tool that outlines the expected cash inflows and outflows for a business over a specific time period, typically on a monthly basis. By detailing these cash movements, the cash budget helps organizations manage their liquidity effectively, ensuring that they have sufficient cash to meet their obligations and make informed decisions about spending and investments.

Inclusion of projected cash inflows allows businesses to forecast how much money will be coming in, typically from sales, loans, or other sources of revenue. On the other side, projected cash outflows detail the expected cash payments for expenses such as operational costs, salaries, rent, utilities, and any other planned expenditures.

The cash budget serves as a strategic guide, enabling organizations to anticipate cash shortages or surpluses and facilitating better financial planning and control. Therefore, the focus on projected cash inflows and outflows is what accurately captures the essence of a cash budget.