What is a cash budget?

Cash budgets are used to see if a company has enough money to cover its operational costs during a certain period. It takes into account several different variables related to a company or business's finances, including:

• When a business makes money

• How a business' money makes money

• Where the money comes from (other businesses B2B, consumers, etc.)

• Business expenses

• Business incomes

• How much money is available to a business within a given time frame

Cash budgets are very important in helping determine a company's financial stability and overall financial health by informing it how much money is coming into the company and how much money is leaving the company during a set period.

Cash budgets are very useful for companies looking to cut costs without any negative effects on their operations.

Cash budgets can be interpreted mainly in two ways:

• Positive cash budget. A positive cash budget indicates that a business will have money left over after paying all its financial obligations, such as business expenses, loans, and other items.

  Positive cash budgets also reflect companies' opportunities to redirect cash flows for other purposes like covering loans and debts or reinvesting the money in stocks or needed materials.

• Negative cash budget. Negative cash budgets occur when a company is not bringing in enough money to cover its expenses and financial obligations.

  Sometimes negative cash budgets are not alarming. For instance, companies often sell services or products based on a line of credit. This can help in the long run to grow a business if executed properly. Investments can also cause this.