The goal is to maintain sufficient cash for firm operations from month to month. This type of cash flow analysis is called developing the cash budget .
Time Required: 3 hours
- This type of cash flow analysis is called cash budgeting preparation and analysis. It is part of your firm's short-term financial forecasting plan. Determine the amount of cash that will flow into your firm during the month. If you are just starting your business, you should include the beginning balance in cash that you want to have available every month. There would also be the amount of sales you have during the first month. Sales would include both cash sales and
sales that you make to your customers who pay on credit. Here's an example you can follow to develop your Schedule of Cash Receipts (Sales Receipts).
- Determine the amount of cash that will flow out of your firm during the month. You will have expenses. You will probably have to buy office supplies. Other monthly expenses may include advertising, vehicle expenses, payroll expenses, just to name a few. You will have some quarterly expenses, such as taxes. You may have expenses that just occur occasionally, like purchases of computer equipment, vehicles, or other larger expenses. Here is an example of a Schedule of Cash Payments that is the second step of the cash budget.