Cash flow Budgeting

Cash flow budgeting

In any organization cash plays a vital role in a running business. The existence of the organization is based on profitability, and the whole operation is based on cash. Organizations decisions are based on keeping cash position under consideration. In an organization, the major responsibility of management is to maintain balance in cash inflows and cash outflows. In cash budgeting, all areas of an organization is considered such as revenues and expenses expected to occur during forecasting period (Sharma, 2009).

The objective of cash budgeting in view of planning to foresee the requirement of cash from external sources and where the period in which organization will be having excess cash (Khan & Jain, 2008).

There are many benefits an organization can achieve by successfully budgeting cash flows. An organization foresee it short term needs in the future and understanding seasonal needs of financing etc. (Sharma, 2009).

By analyzing Cyrus Brown Manufacturing (CBM) as shown in table I, it is noted that company evolved cash from financing activities; in first four months CBM's ending cash balance is below the minimum requirement of cash, which is $ 50,000. In three months, company will be repaying its all of debt borrowed, and there is a total of four months in which company will be generating excessive cash than the minimum requirement. In addition, company will be requiring external financing as it is noted that in most of the months, CBM will require external finance to meet its maintainable cash limit which is $ 50,000. In two months, there will be negative ending cash balance of CBM. This shows that CBM will be requiring external financing to cover its outflows.

CBM will be requiring short term liabilities to maintain its cash requirements. Current liabilities include line of credit. In the line of credit management ...