Everyone could be businessmen and businesswomen. Why is it that some don’t make it past a certain point? Why is it that some wrap up their businesses after the five-year mark? How is it possible for some businesses to keep growing like there is no stopping them? All these questions have one answer and that applies to most situations. The one thing that determines everything else is financial planning. Your fate as a business owner almost entirely depends on it. Planning for a cash budget is, thus, of paramount significance. Having a good budget not only lets you plan effortlessly but also be prepared for unpredictable situations.
What is a cash budget?
A cash budget is not a difficult concept. If you know how to manage a household budget then managing a cash budget will be rather simple. Planning a cash budget will let you know exactly when there are imbalances in the “cash in” and the “cash out” segments. Having a cash budget literally lets you see the future. It has the potential to protect your business from sudden changes in cash flow. This will give you an understanding of how businesses work in various situations. It will also help you in fresh recruitments and in expansion plans. You will be able to work on both the macro as well as the micro levels of your business.
Three categories of cash budgets
Cash budgets can be broadly classified into three categories. They are listed below:
- Approximate cash position
This includes several things, for example, the amount of cash you wish to keep handy at all times. The amount of cash at hand also depends on the kind of business that you have and the way cash flows in and the frequency of quick investment opportunities.
- Amount of time
The amount of time covered by the cash budget is important.
- Income and expense
This is more of an estimation of how much money flows and how much money flows out.
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