Now let's pull all of these concepts together in one place and put them on a forecast document. Look at Appendix B-3 & B-4 for a sample blank form for a cash budget and an example of a completed cash budget.

The blank form cash budget shows columns for three time periods. There is no magic to this. It is only intended to be representative of the general format. It is up to you to decide what your forecast period is to be.

For now, look at the descriptions down the left side of the forecast. They list cash receipts, and then cash disbursements with a recap at the bottom. In order to complete the cash receipts section, you will need your sales forecast
and your accounts receivable collection patterns worksheet. After having done the considerable detail work required to develop these two documents, actually filling in numbers on the cash budget itself is not difficult.

You will see that there is also a provision for other cash receipts, such as investment income, investment maturities and sales of fixed assets. It is important to the integrity of your forecast that all cash receipts be included.

Next you will complete the cash disbursements section. Lump all of your merchandise inventory into a single line item and do the same for all of your general operating expenses under the heading of general payables. Notice that other categories such as investment purchases are included. Similarly, if you plan to purchase a fixed asset such as a vehicle or some equipment, you would include a category for it. Just as all cash receipts are to be included in the receipts section, all disbursements are also to be included.

Each line item in the receipts and disbursements sections will be supported by some kind of worksheet or analysis that you have already made to project the various categories. For example, your supporting worksheet for general payables will look like the operating expense section of your income statement. Each expense account will be listed. Some of these individual expense accounts will in turn have their own detailed worksheets showing your previous work to determine forecasting.

Finally, at the bottom of the cash budget is the recap. This is where you will show the monthly effect of your forecast, and decide if that result is acceptable. You may or may not show a minimum cash balance; that is your choice.

The purpose of the cash budget is to put various possible future courses of action on paper to see the proposed result before you become committed to a particular course of action.