What is a cash budget?

A cash budget is an accounting device used to effectively monitor and manage the immediate cash flow of a home or business budget. Many people choose to use a cash approach as a quick and easy way to monitor the financial condition of a home or small business on a daily, weekly or monthly basis. In general, cash budgets are used to manage short-term cash flow by creating an organized means of tracking cash receipts and balancing them against cash disbursements during the accounting period.

Part of the genius of a cash budget is the simplicity of the approach. It is often possible to employ this principle using a basic spreadsheet. By creating columns that allow you to record basic information, you can quickly see how much money went into the period and how much went out. This is done by recording each cash receipt and disbursement in the spreadsheet. Often the date, amount and a brief description of the transaction are all that is needed.

The cash budget is such a simplistic tool that even people who feel they don't have a real accounting view can employ this approach. Since cash inflows and outflows can be tracked in the same format used for a standard checkbook, most people will find that the process takes very little time. A simple project budget will provide a useful view of how well the entity is performing within the approved expenses for the period.

You can keep a cash budget in a simple ledger or create one using spreadsheet software. Most accounting software programs are also equipped with a simple budgeting feature that pulls data from the database and provides a quick snapshot of the period under consideration. For people who don't need a professional-grade accounting database but don't feel competent to design a cash budget model using a spreadsheet, there are several budgeting programs available for download.

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