Cash budgets
A cash budget is a document produced to help a business manage their cash flowThe movement of money in and out of the business.. It is important that businesses have enough cash to pay employees, buy supplies and cover business expenses.
The main items shown on a cash budget are:
- Opening balance - The amount of money available at the beginning of the month. It is the same amount as the closing balance from the month before.
- Receipts - A list of all money expected to go out of the business such as rent, wages or electricity.
- Closing balance - The cash balance left at the end of the month after all payments have been taken away from the business receipts.
An example of a cash budget is shown below:
Cash budget for Treat's coffee shop for January - March
| January (£) | February (£) | March (£) | |
| Opening balance | 4000 | 3000 | 300 |
| Receipts | |||
| Sales | 3000 | 2500 | 2000 |
| 7000 | 5500 | 2300 | |
| Payments | |||
| Supplies | 1000 | 1200 | 1200 |
| Coffee machine purchase | ---- | ---- | 1000 |
| Rent | 1000 | 1000 | 1000 |
| Wages | 2000 | 3000 | 2000 |
| 4000 | 5200 | 5200 | |
| Closing balance | 3000 | 300 | -2900 |
| Opening balance | |
| January (£) | 4000 |
| February (£) | 3000 |
| March (£) | 300 |
| January (£) | |
|---|---|
| February (£) | |
| March (£) |
| Receipts | |
| January (£) | |
| February (£) | |
| March (£) |
| Sales | |
| January (£) | 3000 |
| February (£) | 2500 |
| March (£) | 2000 |
| January (£) | 7000 |
|---|---|
| February (£) | 5500 |
| March (£) | 2300 |
| January (£) | |
|---|---|
| February (£) | |
| March (£) |
| Payments | |
| January (£) | |
| February (£) | |
| March (£) |
| Supplies | |
| January (£) | 1000 |
| February (£) | 1200 |
| March (£) | 1200 |
| Coffee machine purchase | |
| January (£) | ---- |
| February (£) | ---- |
| March (£) | 1000 |
| Rent | |
| January (£) | 1000 |
| February (£) | 1000 |
| March (£) | 1000 |
| Wages | |
| January (£) | 2000 |
| February (£) | 3000 |
| March (£) | 2000 |
| January (£) | 4000 |
|---|---|
| February (£) | 5200 |
| March (£) | 5200 |
| January (£) | |
|---|---|
| February (£) | |
| March (£) |
| Closing balance | |
| January (£) | 3000 |
| February (£) | 300 |
| March (£) | -2900 |
There are many reasons why a business may have a negative closing balance:
- the purchase of a new assetSomething a business owns that has monetary value such as a delivery van or money in the bank. such as a coffee machine or delivery van
- more money going out of the business (payments) than coming into the business (receipts)
- an increase in the cost of supplies
- a decrease in sales
- an increase in business expenses such as staff wages
