CashBudget

A cash budget, also referred to as a cash budget or cash forecast, is a detailed projection of an organization’s expected cash inflows and outflows over a specific period. It is a core component of the master budgeting process and is primarily focused on liquidity and the timing of cash movements rather than on profitability. By forecasting cash balance changes, it helps management ensure that the entity can meet its obligations and avoid shortfalls.

A cash budget typically includes estimated cash receipts (such as cash sales and collections from credit sales) and estimated cash disbursements (including payments for purchases, operating expenses, taxes, interest, and debt service), along with planned capital expenditures. Beginning cash balance for the period is carried forward, and the budget produces an ending cash balance for each period. If the ending balance falls below a minimum target, the budget identifies financing needs, such as borrowing or drawing on a line of credit, and schedules repayments and interest costs.

The budgeting process often uses monthly or weekly time horizons and can be integrated with other budgets, such as sales, production, and purchasing. It may incorporate scenario analysis to reflect best-case, most likely, and worst-case outcomes and is frequently updated as actual results become known. While a cash budget informs short-term liquidity decisions, it does not address profitability and relies on the accuracy of its underlying assumptions and timing forecasts.