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What is the difference between cash flow and profit? What is a receipts and payments budget? Why do lenders and investors often ask for a cash budget? What is a cash surplus and cash deficit in the context of a cash budget? How do you calculate cash payments to suppliers? How is a cash budget structured/formatted? What actions can management take if the cash budget shows a shortfall? What can management do with a forecast cash surplus? How does the cash budget link to working capital management? How do capital expenditure and financing appear in the cash budget?
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How do you calculate cash receipts from credit sales?

Intermediate

Answer

Apply the expected collection pattern to budgeted sales: e.g., if 30% is collected in the month of sale and 70% the following month, receipts in a month = 30% of this month's sales + 70% of last month's sales. Allow for bad debts and settlement discounts. This lag between sale and cash is central to the cash budget.
Sales: Jan 100k, Feb 120k. Collect 30% same month, 70% next.
Feb receipts = 30%x120k + 70%x100k = 36k + 70k = 106k.
Real-world example The team applies the historical collection profile to phase budgeted sales into cash receipts.

Common follow-ups: How do collection patterns affect receipts? | How are bad debts handled?

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All 34 Cash Budgeting questions