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A cash budget is a document produced to help a business manage their cash flow. It is important that businesses have enough cash to pay employees, buy supplies and cover business expenses.

The main items shown on a cash budget are:

• Opening balance - The amount of money available at the beginning of the month. It is the same amount as the closing balance from the month before.
• Receipts - A list of all money expected to go out of the business such as rent, wages or electricity.
• Closing balance - The cash balance left at the end of the month after all payments have been taken away from the business receipts.

An example of a cash budget is shown below:

Cash budget for Treat's coffee shop for January - March

There are many reasons why a business may have a negative closing balance:

• the purchase of a new asset such as a coffee machine or delivery van
• more money going out of the business (payments) than coming into the business (receipts)
• an increase in the cost of supplies
• a decrease in sales
• an increase in business expenses such as staff wages