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  • 1. Cash Budgets A cash budget is a forecast of estimated cash receipts, estimated cash payments and the resultant cash position for a certain period of time. Cash Budgets
  • 2. Cash Budgets
    • Income Statement
    • Balance Sheet
    • Statement of Cash Flow
    Past events
  • 3. Cash Budgets
    • Budgets
    Future events
  • 4. Why are cash budgets prepared?
    • Assists with the identification of when commitments are due
      • Ensures money is available at that time
      • Important business able to meet commitments as they fall due
      • If debts are not paid on time poor reputation will affect credit rating of business
    Cash Budgets
  • 5. Cash Budgets
    • Reveals periods of excess funds
      • Business should avoid idle funds left in bank accounts
      • Low interest returns on these accounts
      • Identifying such periods allows scheduling of investments into short-term money markets, fixed deposits, government securities etc
  • 6. Cash Budgets
    • Reveals weaknesses in business ’ s debt collection policy
      • Average collection period for accounts receivable to pay is 3 months
      • Normal terms of credit are 30 days
      • Steps can be taken to improve credit collection
  • 7. Cash Budgets
    • Adjustments for seasonal fluctuations can be made
      • Some businesses experience high/low sales in certain parts of the year
        • Tourism
        • Farming
        • Department stores
  • 8. Cash Budgets
    • Budget reveals periods when shortages of funds may occur
      • These periods can be identified ahead of time
      • Arrangements can be made with banks to meet shortfalls – bank overdraft
      • Steps may be made to avoid these shortages or to repay overdrafts asap to avoid high levels of interest repayments.
      • Cash budgets are often demanded by banks when business seek application for loan
        • Used to identify if business is capable of meeting repayments
  • 9. Cash Budgets
    • Budgets are a form of control
      • Targets set assist with the monitoring of employee work
      • Investigations into the difference between actual and budgeted figures should reveal why differences have occurred
      • Steps can be taken to correct practice
  • 10. Cash Budgets Types of budgets
    • Short term (1 month – 1 year)
      • Sales budgets
      • Production budgets
      • Cash budgets
  • 11. Cash Budgets
    • Long term (up to 10 years)
      • Capital expenditure budget