A cash budget details a company's cash inflow and outflow
during a specified budget period, such as a month, quarter or year. Its primary
purpose is to provide the status of the company’s cash position at any point of
time. This helps the company make critical decisions such as creating cash
reserves to make arrangements for projected shortages and using excess funds
prudently. Additionally, the cash budget helps in prioritizing payments in the
budget period. It also helps in analyzing budget-versus-actual variances in
cash inflow and outflow.
Cash forecast is the estimate of the timing and amounts of
cash inflows and outflows over a specific period (usually one year). A cash
flow forecast shows if a firm needs to borrow, how much, when, and how it will
repay the loan. Also known as cash flow budget or cash flow projection.