## Cash Budget
A cash budget is a comprehensive financial plan showing projected cash receipts and cash payments for a budget period, covering both revenue and capital items.
### Two-Part Structure
```
Cash Budget
├── Part A: Cash Receipts
│ ├── Cash sales
│ ├── Collections from debtors
│ └── Other receipts (asset sales, borrowings)
└── Part B: Cash Disbursements
├── Cash purchases
├── Payments to creditors
├── Salaries and bonuses
├── Advances to suppliers
└── Capital expenditures
```
Estimates are prepared on a monthly basis.
### Objectives
- Assess probable cash position → reveals excess or shortage in advance.
- Arrange short-term borrowings before a shortage hits.
- Coordinate cash with working capital, sales, and debt management.
- Establish a sound basis for credit control.
- Reveal the impact of seasonal demands, large stock build-ups, and collection delays.
### Advantages
- Secures optimum working capital for smooth operations.
- Eases strain of cash shortages.
- Facilitates temporary investment of surplus cash.
- Provides for planned, normal business growth.
### Integration with Other Budgets
The cash budget is directly fed by: Sales Budget → collections timing; Direct Materials Purchases Budget → payment timing; Selling & Administrative Expenses Budget → disbursement timing.
It is also a key component of the Budgeted Balance Sheet.