Cash Budget details how the business expects to go from the beginning cash balance to the desired ending cash balance.
About cash budget :
A cash budget is an estimation of the cash flows of a business over a specific period of time. This could be for a weekly, monthly, quarterly, or annual budget. This budget is used to assess whether the entity has sufficient cash to continue operating over the given time frame. The cash budget provides a company insight into its cash needs (and any surplus) and helps to determine an efficient allocation of cash.
How a Cash Budget Works
Companies use sales and production forecasts to create a cash budget, along with assumptions about necessary spending and accounts receivable collections. A cash budget is necessary to assess whether a company will have enough cash to continue operations. If a company does not have enough liquidity to operate, it must raise more capital by issuing stock or taking on more debt.
A cash roll forward computes the cash inflows and outflows for a month, and it uses the ending balance as the beginning balance for the following month. This process allows the company to forecast cash needs throughout the year, and changes to the roll forward to adjust the cash balances for all future months.
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