Plain definition
A cash budget is a time-phased management plan of expected cash receipts, cash payments, and resulting cash balances. It normally covers weeks or months, but the useful time interval is the one that exposes when commitments fall due. It is not an income statement: it records expected cash dates, which can differ from the dates revenue and expenses are recognised.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A small manufacturer prepares a May cash budget with opening cash of . It expects of customer receipts and of payments for materials, payroll, and rent, leaving at month-end. The owner sees that the lowest weekly balance is on 18 May, before two large customers are due to pay.
Because the approved minimum is , the owner does not wait for the month-end . She asks the collection team to confirm the two receipts, delays a non-essential marketing payment, and reruns the weekly schedule before approving a new equipment deposit.
| Opening cash | |
|---|---|
| Expected customer receipts | |
| Expected payments | |
| Expected closing cash |
Why it matters
Monthly profit or a positive month-end balance can conceal a shortage during the month. A dated cash budget gives the manager time to change an action while options still exist, instead of discovering the shortage when payroll or a supplier payment is already due.
Practical consequence
Maintain a rolling budget with enough detail around the next high-risk weeks. For every material line, record the amount, expected date, evidence, confidence, and person who will update it. Compare actual receipts and payments with the approved budget, separating a late movement from a changed amount. Revise the next periods using the new evidence, but retain the original version so recurring forecasting errors remain visible.
Try your own numbers
Map expected cash in and out week by week, then see the lowest point before it arrives.
13-week cash-flow forecast