What exactly is a cash flow budget?
One of the three components of your business financial statements (along with the balance sheet and income statement), your cash flow budget is an estimate or projection of your business’ cash inflows — i.e., money expected to come in, such as cash from sales or the collection of accounts receivable — and the time period when you expect to receive it. It’s also a projection of your cash outflows — all the money you’ll need to pay to suppliers, accountants, utility companies, etc., i.e., your accounts payable. Your cash flow budget is critical to the success of your business, because you could have great profits on paper, but still experience a cash flow shortfall. If you just concentrate on profits, such a cash flow shortfall could crop up and cripple your business. For some businesses, a six-month cash flow budget is realistic and practical, while others prefer to project cash flow annually. If you are applying for a bank loan, though, your projections should cover at least the next t
