A cash budget can be used to:

Annotations:

• Cash Budgets

1. Highlight periods when a negative bank/cash balance is expected. This allows appropriate finance to be arranged in advance.
2. Forecast surplus cash available as it may allow a firm to invest in assets for the future.
3. Allow corrective action of anticipated overspending on certain payments.
4. Avoid liquidity problems.
5. Secure a loan from a bank.
6. Make comparisons between actual and projected figures to analyse managers' ability to control and monitor cash flows.