CASH-FLOW BUDGETS

Cash Flow Budget is also known as Cash Budget. It is the detailed future plan in monetary values of INFLOWS AND OUTFLOWS. Cash Flow Budget requires making the following decisions and estimates;
  1. How much cash does the Organization estimates to generate in a particular time or period? This is known as Cash-Inflows. These Inflows are basically from Customers, Clients and Donors.
  2. How much will it cost the Organization to generate the expected Cash-Inflows? This is known as Cash-Outflows.  They are basically to pay Vendors/Suppliers, purchase Assets, Pay Interest on Loans, Repayment of Loans and Payment of taxes.
  3. what are the sources of Inflows other than Sales & Services rendered to customers? These sources can be in form of Bank Loans, Equity or Other Loans.
  4. how much cash balance does the organization intends to have at the end of the period? This is known as Net Cash-Flow.
In summary of the above, cash flow budget helps an organization or individual to make estimates of all cash to be received and all expenses (including purchase of assets) that are expected to be occur within a particular time frame. cash Budget can be made;
  • Daily
  • Weekly
  • Monthly
  • Quarterly
  • Biannually
  • Annually
A Cash Budget can be Short Term or Long Term. Most Cash Budgets are prepared on short-term basis to ensure efficient Working Capital Management. However, if Cash Budget is prepared on Long Term basis, factors such as Inflation and Government Policies among others should be considered.
A cash flow budget enables you to achieve the following;


  1. Proper Business Planning
  2. Avoid Working Capital Issues
  3. Meet up with financial obligations
  4. Cash Mismanagement and ensure proper PETTY CASH MANAGEMENT
  5. know if the Organization can generate enough Income to meets its Expenses.
  6. Determine of the Organization will be able to service the various loans obtained within a given period
  7. Evaluate an Organization's Financial Performance
  8. See the future and be able to determine the due time for expansion of Assets or Business.
  9. To have focus and direction
  10. To invest accordingly
Every successful business relies on a cash management system to carefully control income and expenses. Businesses use Cash Flow Budget to approximate the AMOUNT OF CASH AT HAND (Bal B/Fwd) at the Beginning of a period, the AMOUNT OF CASH INFLOWS during a period, the AMOUNT OF CASH OUT FLOWS during a period and the AMOUNT OF CASH BALANCE (Bal C/Fwd) at the end of the period.
Cash Flows can result from;
  • OPERATING ACTIVITIES (i.e. Cash Sales, Collections of Debts from Debtors, Cash Purchases, Payment to Vendors, General Overhead and Admin Expenses).
  • INVESTING ACTIVITIES (i.e. Purchase or Sale of Fixed Assets, Purchase of Shares from other Organizations, etc)
  • FINANCING ACTIVITIES (i.e. Sale of Company shares, Loans, etc)

Cash Flow Budget is essential for every business. When drawing up your Cash Budget you need to make a list of all Budget (Income/Cost) Centers. The basic foundation for any budget estimate is historical reports. Financial Reports of previous budget periods form the basis for future budgets. This picture below gives you an idea of how a Cash Budget should look like;

On the top part is a list of all areas in which the Organization expects INFLOWS. Note that the Inflows should be imputed in the month in which they are expected to hit the company's account. For example, if you make sales of N5,000,000 in January with the conditions that 50% will be paid immediately, 30% in the next month and 20% in the next three months. When making your Cash Inflow Budget, N2,500,000 will be budgeted for Sales Inflow in January, N1,500,000 in February and N1,000,000 in March. It is wrong to put N5,000,000 in January. The same applies for Cost/Expenses.

On the Middle part is a list of all areas in which the Organization expects to incur Expenses. Here they will make estimates of the total cash outflows within a given period.  COT and Bank Charges should be computed based on the SUB TOTAL CASH OUTFLOWS. The VAT ON BANK CHARGES should be computed at a % of the BANK CHARGES. In Nigeria the VAT is 5% of COT & Bank Charges.

The Bottom Part is a summary of NET CASH FLOW, CASH BROUGHT FORWARD from previous period and CLOSING CASH BALANCE for the current period.
If you need our CASH BUDGET TERM FREE TEMPLATE KINDLY visit our Free Templates Page and download the CASH FLOW BUDGET TEMPLATE 1. This Template has been designed for Monthly Cash Budget.

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