The cash budget will look a lot like a budget you would do for your personal budget. It includes income and expenses, as well as any cash overages or deficiencies. If you borrow money to purchase equipment you may also have a financing section. In your personal budget, this would be things like mortgages and car loans.

Hupana Running Company doesn’t have any outstanding loans, so we don’t need to worry about that section, but just be aware that it might exist. There also may be instances where a company has a short term cash flow issue. This can occur when a huge production run may be needed prior to a big selling season. So, if Hupana needed to make 1000 pair of shoes in October for December sales, they may run short of operating cash due to needing to bring in raw materials, labor and the other manufacturing costs prior to receiving the income for the shoes.

When this happens, it is possible to take out what is called a working capital line of credit to cover those short term shortfalls of cash. These are typically very short term notes, where the money is used to pay expenses until the revenue comes from the sales and then immediately repaid. Unlike a mortgage or equipment loan with set monthly payments, these short term notes can be paid off quickly with large payments. They are helpful to even out cash flow.

So back to our cash budget. We are going to need a bunch of information from our previous work to complete this one! If you haven’t already, you might want to either print those prior budgets or have them pulled up in multiple tabs. It will make it much easier to find the information you need!