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Page 4 of 10
Budgeting
3. Cash Budget
The cash budget (or cashflow forecast) uses the information in the sales and expenditure budgets to forecast the money going into and out of your bank account each month.
3.1 What is the timing of cash movements?
- When will the money from your forecast sales actually arrive? Should you allow for a percentage of bad debts (sales which are never paid for)?
- When will you pay out for costs such as salaries, equipment and raw materials?
- Some payments will have to be made in advance (eg rent, rates and insurance) or by monthly standing orders.
3.2 What other money will you be receiving and paying out?
- Finance, eg receiving grant payments or repaying a loan.
- Any capital expenditure.
- Tax payments or rebates.
- VAT payments or receipts (if you are registered for VAT).
3.3 Using these figures, forecast your bank balance at the end of each month.
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