Cash Budget

Finance

Quick Definition

A Cash Budget is a financial plan that estimates cash inflows and outflows over a specific period, helping manage liquidity.

Detailed Explanation

A Cash Budget helps individuals and businesses plan and control cash flow, ensuring they have enough funds to meet expenses and avoid shortages.

It is usually prepared monthly, quarterly, or annually and focuses only on actual cash movements, not accounting profits.

Components of Cash Budget

  • Cash Inflows: Sales receipts, income, loans
  • Cash Outflows: Expenses, salaries, rent, loan repayments

Types of Cash Budget

  • Short-Term Cash Budget: Weekly or monthly
  • Long-Term Cash Budget: Annual or multi-year

Why Cash Budget Matters

  • Prevents cash shortages
  • Helps in financial planning
  • Improves liquidity management

Cash Budget vs Cash Flow Statement

  • Cash Budget: Future estimate
  • Cash Flow Statement: Past record

Example

"A business estimates ₹1 lakh inflow and ₹80,000 outflow for a month: 👉 Net cash surplus = ₹20,000"

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