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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 receipts from credit sales? 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? How do bad debts affect cash receipts in the cash budget?
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Budgeting & Forecasting › Cash Budgeting

How do you calculate cash payments to suppliers?

Intermediate

Answer

Apply the payment lag to budgeted purchases: if suppliers are paid the month after purchase, this month's payments equal last month's purchases (adjusted for any discounts taken). Purchases come from the materials/purchases budget. Correctly timing payments reflects the credit terms the business enjoys.
Purchases: Jan 60k, Feb 70k. Pay one month in arrears.
Feb payments = Jan purchases = 60k.
Real-world example Payments in February equal January's purchases because suppliers are paid a month in arrears.

Common follow-ups: Where do purchase figures come from? | How do supplier terms affect timing?

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All 34 Cash Budgeting questions