1. Cash Budgets 1 Module 3C Canada Bridges Project Management Tools Cash Budgets - Module 3C

2. To be able to forecast the likely cash at the end of each month To make management aware of and plan for cash surpluses and cash deficits Avoid situations where there is no money to pay operating expenses What is the Purpose of a Cash Budget? Canada Bridges Project Management Tools Cash Budgets - Module 3C 2

3. To be able to arrange financing (a source of funds from outside the company) to assist in the months there is a cash deficit To help management decide how and when to spend the cash surpluses What is the Purpose of a Cash Budget? Cont’d Canada Bridges Project Management Tools Cash Budgets - Module 3C 3

4. A cash budget is a plan and can be changed as you move through time – things may change. You will try to predict what cash will be coming in and going out of your business / organization. Once you know your expected cash position at the end of each day / month / year, you can plan around your budget. The Basics of Creating a Cash Budget Canada Bridges Project Management Tools Cash Budgets - Module 3C 4

5. The best way to create a budget is using a spreadsheet, since numbers can be easily changed and the whole spreadsheet will reflect that change. You will label the days / months along the top of the columns - you will enter the various inflows and outflows along the left hand margins of the rows. You will put in some formulas, where required. Using a Spreadsheet Canada Bridges Project Management Tools Cash Budgets - Module 3C 5

6. Cash InflowsAll sources of cash Cash OutflowsAll items that cause cash to go out of the business (i.e. expenses, purchases, payments) Net Cash FlowCash Inflows less Cash Outflows. If Cash Outflows exceed the Cash Inflows, the number will be negative. Opening BalanceCash and money held by your company at the beginning of the budget. (held in banks, investments, in your cash register) Ending BalanceOpening Balance plus the Net Cash Flow. If the number is positive, you have a Cash Surplus, The Ending Balance could be negative. What Are the Main Row Items in a Cash Budget? Canada Bridges Project Management Tools Cash Budgets - Module 3C 6

7. Capital investment by an owner Grants from government Fees from clients Payments to you Sale of services or goods Sale of assets (i.e. old equipment) Loan from a bank Types of Cash Inflows Canada Bridges Project Management Tools Cash Budgets - Module 3C 7

8. Expenses such as: – Salaries – Rent – Marketing – Supplies – Inventory – Electricity/water Loan payments Taxes Purchase of land or building Purchase of equipment Types of Cash Outflows Canada Bridges Project Management Tools Cash Budgets - Module 3C 8

9. Questions? Canada Bridges Project Management Tools Cash Budgets - Module 3C