What information is needed in order to prepare a cash budget?

What information is needed in order to prepare a cash budget? What is the relationship between an operating budget and a cash budget? Why is it important for an organization to prepare a cash budget

What information is needed in order to prepare a cash budget?Amanda,



You will need the beginning cash balance, bad-debt experience (what % of your accts receivable can't be collected), the lag time for collections of your a/r, what cash disbursements are expected for your costs of goods sold, other business disbursements (e.g., fixed assets purchased), any financing activities (sale of stock or bonds or redemption of bonds or stock buybacks).



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The operating budget is very similar to our income statement, except we use our estimated future sales and costs instead of historical sales and costs. The results of our operating budget drive what your cash budget will be.



You prepare a cash budget so that you have an estimate of how much liquidity you will need/have in order to meet your short-term or current liabilities - it's to ensure short-term solvency.



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