Budget Breakdown: How to Prepare a Cash Budget

When making a cash flow forecast, it’s essential to be able to visualise actual figures for inflows and outflows of cash in your business. A cash budget does exactly this by creating a breakdown of your business’s expected cash activity.


You can follow these steps to learn how to make one:


  1. Create a spreadsheet for your cash budget. You can use your previous cash statements as a template or access the one included in our Free and Easy Action Plan: “How to Forecast Cash Flow”.


  1. Limit your forecast to a foreseeable time period to keep your estimates reasonable and organised. Are you creating a cash budget for the next three, six or twelve months? Once you’ve decided on a time frame, you can organise and update your spreadsheet to include fewer or more columns as needed.


  1. Estimate how much you will be selling during this time period. Just this Easter, many businesses were able to increase sales for products like greeting cards, custom desserts, Easter-themed decorations and many more. Delve into your sales history to identify patterns that coincide with trends and holidays like this one.


  1. Based on the above estimate, list down your expenses on the spreadsheet. To meet a rise in demand for your product you need to plan for an increase in spend leading up to this period. Adjust your spending on supplied, labour, utilities, and the like to accommodate higher expectations for production.


  1. Reserve a line in your budget for repairs and emergency expenses. You’ll want to have somewhere you can pull funds from in the event anything unforeseen comes up.


  1. List down how much cash you expect to come in. If your business extends credit, take note of the average time your customers take to complete their payments and base your inflows on those periods.


  1. Find out what your bottom line is by adding up all your expected inflows and outflows. Does the current budget leave you in a financial position you’re comfortable with? Different-sized businesses may need different levels of cash to keep their operations up and running.


  1. Adjust your budget to cover any gaps if you find that your bottom line doesn’t leave your business in a healthy position.


  1. Lastly, find out if you’re sticking to your budget. A business should always compare its actual cash flow with its projected cash flow. Examine which figures worked and why with your CFO or accountant so that you become more equipped to measure your business’s health and progress over time.



Our friendly team of professional business advisers and accountants are more than willing to help you with budget and cash flow management. To learn more, you can contact Omnis Group at 9380-3555 or 1800 99 66 90.