Cash Budget

Introduction of budgets.

Cash budget is an estimation of cash inflows and also outflows of the business of an organization for a specific period of time. Cash budgets are mostly used to tell us weather the entity have enough cash to fulfill to the regular operations of the organization and also weather is there any excess money that is left in-productive. Budgeting plays a key role in an organization. Cash budget is very important because it allows the organization to ensure of how much credit it can gives to customer before it begins to have liquidity problems. Budgets can set goals for achieving a certain level of income and also monitor and maintaining expenses.

I agree with the statement of “management of any business will be ineffective without the preparation and use of budgets”. Here are some arguments that will support to my agreement.

Firstly, budgets gives motivation.

Creating a budget helps the employee get closer together and improve communication with one another. By setting budgets, staff / employee will feel involved within the organization, plus the profits that the organization gets can also be shared among the staff as a bonus or a pay increment. With this benefits the staff will feel motivated to commit to the organization. Since the staff is engage in doing their jobs, this also helps to boost the productivity and also reduce turnover.

Secondly, planning.

Budget also allows a managers to plan, evaluate them in detail and to decide on the best alternative choices / ways. It also encourages managers to expect/predict problems before they arise, thus it give them time to consider alternative ways of overcoming the problems when it occur. It also helps to prepare for an unforeseen circumstances. Budgeting by planning tend or perhaps produce better result than a decision made ‘on the spot’.

Thirdly,