A cash flow budget is an estimation of the flow of cash into and out of a business over a set period of time. They can be weekly, monthly, quarterly or an annual budget.

A cash flow budget allows a business to assess whether it has enough cash to continue to trade over a given period, and predict its cash needs or cash surpluses at any point in time. A business may be profitable but have trouble paying costs when they are due. A cash flow budget allows for the monitoring of receipts and payments in the business that will highlight when cash may be short so that action can be taken.

To calculate your cash flow budget you will look at estimated cash inflows and outflows over the specific period you wish to monitor. These use your actual historical results together with predictions for the future.  Fixed and variable costs must be considered in your calculations. Your business will have fixed costs such as rent, loan repayments, insurance, telephone andCash Flow Budgets wages. Variable costs could include materials used to make sales, utilities, advertising, motor vehicle expenses, repairs & maintenance, and licence fees. Cash receipts may be more difficult to estimate as they are based on the number and amount of sales of goods or services. Trends from previous years will assist, as well as knowledge of seasonal variations and contracts that are already confirmed.

The second and most important step in using cash flow budgets is comparing the actual income received and expenses paid against the amounts predicted. This allows you to monitor how the business is performing and make any changes that are required. It will highlight areas of concern – such as slow paying customers or unexpected cost increases.  By tracking both estimated and actual income and expenditure you will be in a better position to plan your cash usage and seek funding if required.  

The past three years have shown us that change can occur at any time. A cash flow budget is a fantastic business tool to help navigate change, facilitate growth and allow you to be one step ahead of your cash flow needs.    


Your RSM Australia advisor can assist with a cash flow budget for your business.