Cash Budgeting

Cash Budgeting

Businesses need cash
1. To pay wages
  1. No workers means nothing produced
2. To buy stock
  1. No stock means nothing to sell
3. To pay fixed costs
  1. Mortgage
  2. Rent
  3. Electricity
  4. Taxes
Cash Flow Problems
1. Too much money tied up in stock
2. Owner takes out too much money
3. Customers take too long to pay
4. Purchasing fixed assets
5. Increase in costs/expenses
6. Not enough sales
To resolve Cash Flow Problems
1. Offer discount for prompt payment
2. Offer discount to customers
3. Sell any unused assets
4. Arrange an overdraft/loan
5. Cut costs
6. Reduce waste
Interpreting a Cash Budget
1. Look for trends in Sales - going down
2. Look for trends in Purchases - going up
3. Look for trends in wages - going up
4. Look for large items of expenditure eg vehicles/machinery
5. Look for decreasing monthly balance
6. Look for decreasing total income
Benefits of cash budgets
1. To see if there's excess cash
2. To help decision making
3. To show if extra finance is required
4. To help control expenses

Resumen del Recurso

	Creado por Mrs Ritchie hace casi 6 años