Cash Budget

AAA

DEFINITION of 'Cash Budget'

An estimation of the cash inflows and outflows for a business or individual for a specific period of time. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/or whether too much cash is being left in unproductive capacities.

INVESTOPEDIA EXPLAINS 'Cash Budget'

A cash budget is extremely important, especially for small businesses, because it allows a company to determine how much credit it can extend to customers before it begins to have liquidity problems.

For individuals, creating a cash budget is a good method for determining where their cash is regularly being spent. This awareness can be beneficial because knowing the value of certain expenditures can yield opportunities for additional savings by cutting unnecessary costs.

For example, without setting a cash budget, spending a dollar a day on a cup of coffee seems fairly unimpressive. However, upon setting a cash budget to account for regular annual cash expenditures, this seemingly small daily expenditure comes out to an annual total of $365, which may be better spent on other things. If you frequently visit specialty coffee shops, your annual expenditure will be substantially more.

RELATED TERMS
  1. Annual Budget

    Any budget that is prepared for a 12-month period. An annual ...
  2. Balanced Budget

    A situation in financial planning or the budgeting process where ...
  3. Zero-Based Budgeting - ZBB

    A method of budgeting in which all expenses must be justified ...
  4. Budget

    An estimation of the revenue and expenses over a specified future ...
  5. Capital Budgeting

    The process in which a business determines whether projects such ...
  6. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
RELATED FAQS
  1. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion of its cash flow ... Read Full Answer >>
  2. What are the pros and cons of operating on a balanced-budget?

    Few issues are more complicated, contentious and controversial in contemporary American politics than balancing the federal ... Read Full Answer >>
  3. What's the difference between budgeting and financial forecasting?

    Budgeting and financial forecasting are financial planning techniques that help business personnel in the decision-making ... Read Full Answer >>
  4. How do I import QuickBooks Pro Account trial balances for the first time?

    You figured out how to create invoices, track sales, streamline your bookkeeping and gather data on your business with Intuit's ... Read Full Answer >>
  5. What is the purpose of drawing up a cash flow statement?

    The purpose of drawing up a cash flow statement is to see a company's sources of cash and uses of cash, over a specified ... Read Full Answer >>
  6. Why does time value of money (TVM) assume that a dollar today is worth more than ...

    The time value of money, or TVM, assumes a dollar in the present is worth more than a dollar in the future because of variables ... Read Full Answer >>
Related Articles
  1. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  2. Markets

    Cash Flow On Steroids: Why Companies Cheat

    Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it.
  3. Budgeting

    Budget-Stretching Gardening Tips

    A bakers dozen of easy, budget-stretching garden ideas just in time for spring and summer planting.
  4. Budgeting

    An Analysis Of The US Trade Deficit

    The United States' trade deficit is historically large, the biggest in the world. With luck, it'll get even larger.
  5. Budgeting

    What is Zero-Based Budgeting?

    Zero-based budgeting starts from a "zero base" and then every function within an organization is analyzed for its needs and costs.
  6. Retirement

    Retirement: The Journey Of 1000 Miles

    Substantial time should be set aside to fully outline one's vision for retirement and the specific steps that must be taken to realize it.
  7. Budgeting

    Do I Need A Personal Accountant?

    You know you need to keep your personal finances better organized. Should you hire professional help, and if so what kind?
  8. Home & Auto

    Tips For Maximizing The Value Of A Kitchen Touchup

    At a fraction of the cost of a remodel, a homeowner can make strategic updates to his or her kitchen that could transform this part of the home.
  9. Economics

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
  10. Investing

    What Tech Companies Seeking Funding Must Overcome

    Tech companies face a unique set of challenges, including a need for timely responses to changes in technology and difficulty recruiting the right talent.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center