What is a cash flow budget?

A cash flow budget is a chronological overview of expected income and expenses over a given period of time. The cash flow budget looks much like the operating budget. It has many of the same categories.
The cash flow budget focuses on the cash (money) that actually has to be taken out of the cash box or the bank - cash to pay salary or debtors. It also focuses on cash that is actually received from customers - cash you can see in the cash box or in a bank statement.

The cash flow budget is a short-term budget that estimates cash inflows and outflows and can predict a business's cash flow gaps for the business. Cash flow gaps occur when cash outflows are greater than cash inflows. Cash flow budgets help financial managers determine whether the business needs to seek outside sources of funds beyond sales to manage anticipated cash shortages. Cash flow budgets also indicate future investment opportunities due to surges in cash inflow, as well as show whether a business will have enough cash to grow. Moreover, the financial manager uses the cash flow budget to help plan for debt repayment or to cover unusual operating expenses.

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