What is a cash budget?

A cash budget is a statement of cash receipts, cash disbursements, and cash surplus in hand or bank for a specified future period. It expresses a numerical description of how cash planning and control will appear at a specified future time.

In other words, the cash budget is a list of expected cash receipts and payments. The statement is prepared by controlling the cash inflows and outflows to meet the liquid assets requirement for a certain time.

A cash budget is a budget that expresses the amount of money that can be received from any source during a certain period, the amount of money that can be spent in any sector, and the amount of money that can be surplus at the end of that period—is called cash budget.

The Steps to Prepare a Cash Budget

We have to follow the steps listed below to prepare a cash budget report efficiently.

1. Calculate the opening cash balance: The first step in preparing a cash budget is calculating the opening cash balance. Generally, the opening balance of the current month is the closing balance of the previous month. Otherwise, you may need to figure out the opening cash based on the related information. In case you can’t figure out the opening balance anyhow, you may assume it to be zero.
2. Calculate receipts amount: In this step, estimate the amount of cash that you will receive in the month you are calculating the budget for. There are various sources of cash receipts. You may need to calculate some workings to figure out the actual amount you will receive. For example, assume the commission on sales is 2%, the amount of sales is 2000$, and the commission on sales is payable after one month of sales. So, the commission on sales ($2000*2%) $40 is payable to your salesman next month. That means it will impact your cash budget in the next month.
3. Calculate payment amount: In this step, estimate the amount of cash that you will pay in the respective month. You have to find out the sources from which the cash will be paid. Similar to the cash receipt, you may need to adjust the amounts by doing some work.
4. Calculate the closing balance: Add the total amount of cash receipts to the opening balance, then simply subtract cash payments from it. So, this is the simplest way to calculate the cash budget in accounting. And our cash budget calculator is created based on this formula.

How does this Cash Budget Calculator Work?

This is a modern web-based tool that helps you to calculate and generate your monthly cash budget report based on the numerical data. You can budget with this calculator for as many months as you need to. The formula for the cash budget is: Opening Balance + Total Receipts – Total Payments = Closing Balance. This formula is properly implemented in this calculator.

For proper output, please follow the instructions listed above.

Conclusion

This is an online cash budget calculator that automatically calculates your monthly budget and shows you the amount you may receive or pay in the budget period. It is possible to know the amount you need to meet your cash obligations in a given month so that you can take proper steps to collect that amount. Also, you can ignore the hassle of over-liquidity by calculating a cash budget.