# How to Calculate a Cash Budget

by Charlotte Johnson

To stay afloat and prosper, a company must keep track of its incoming and outgoing cash. A cash budget is a type of management plan in which a business tracks the amount of money coming in, as well as its expenditures over the course of a specific period of time. A cash budget operates much like a personal budget, but on a larger scale. By analyzing its cash budget, a company can make more informed decisions concerning vital areas, such as production, investments and cutting costs.

Write down a beginning cash amount. For example, a business might have \$20,000 cash in the bank.

Write down the cash that the company expects to receive within a particular time frame. For example, a business might expect \$30,000 in sales and \$25,000 in accounts receivable for the month of January.

Add the expected cash receipts from step two to the amount of cash on hand. In this example, you would add \$30,000 and \$25,000 to \$20,000 to get a total of \$75,000 total cash.

List and add all expected cash payments. Examples of these types of payments might include \$50,000 for payroll, \$5,000 for raw materials, \$1,500 for utilities and \$1,000 for advertising. The total for this example would be \$57,500 in expected cash payments.

Subtract the total expected cash payments from the total cash amount to find the ending cash balance. In this example, you would subtract \$57,500 from \$75,000 to get an ending cash balance of \$17,500.

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