Business & Finance

glossaryTermPage.hero.prefix Cash Budget?

A financial plan that estimates cash inflows and outflows over a specific period to ensure a business maintains adequate liquidity.

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A Cash Budget projects when money will come in (from sales, collections, loans, asset sales) and go out (for purchases, salaries, rent, loan repayments, taxes) over weekly, monthly, or quarterly periods. Unlike a P&L budget that includes non-cash items, a cash budget deals only with actual cash movements. It helps businesses anticipate cash shortfalls, plan borrowing needs, time large payments, and ensure they can meet obligations. It's the most critical tool for preventing business failure due to cash flow crises.

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Closing Cash Balance = Opening Balance + Total Cash Inflows – Total Cash Outflows

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April Cash Budget: Opening balance ₹2,00,000. Inflows: Customer collections ₹8,00,000, Loan drawdown ₹3,00,000 = ₹11,00,000. Outflows: Supplier payments ₹5,00,000, Salaries ₹3,50,000, Rent ₹50,000, GST ₹1,00,000 = ₹10,00,000. Closing balance: ₹2,00,000 + ₹11,00,000 – ₹10,00,000 = ₹3,00,000.

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How far ahead should a cash budget forecast?

For operational management: 13-week (rolling weekly) cash budget. For strategic planning: 12-month monthly forecast. Startups and seasonal businesses should maintain both — weekly for survival, monthly for planning. Update at least weekly based on actuals.

What is the difference between a cash budget and a cash flow statement?

A cash budget is FORWARD-LOOKING (projection/forecast of future cash movements). A cash flow statement is BACKWARD-LOOKING (report of actual past cash movements). The cash budget plans; the cash flow statement reports.

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Cash Flow

The net amount of cash and cash equivalents moving into and out of a business during a specific period.

Budget

A financial plan that estimates income and expenses over a specific future period, used to guide spending and resource allocation.

Working Capital

The difference between a company's current assets and current liabilities, representing the short-term liquidity available for day-to-day operations.

Cash Basis Accounting

An accounting method where revenue and expenses are recorded only when cash is actually received or paid, not when they are earned or incurred.

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