All 34 Cash Budgeting questions
More in Cash Budgeting
How do capital expenditure and financing appear in the cash budget? How do bad debts affect cash receipts in the cash budget? How are settlement discounts reflected in the cash budget? How does a cash budget help decide on financing arrangements? How does inventory purchasing policy affect the cash budget? What actions can improve the cash position shown in a cash budget? How do you treat capital receipts (asset sales, share issues) in the cash budget? What is the difference between the receipts-and-payments method and the adjusted-profit method of cash forecasting? How do you incorporate seasonality into a cash budget? What is the role of a minimum cash balance (buffer) in cash budgeting?
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Budgeting & Forecasting › Cash Budgeting

How do tax and dividend payments feature in the cash budget?

Intermediate

Answer

Corporate tax and dividends are significant, lumpy cash outflows scheduled in the months they're actually paid (which often lags the period they relate to). Including them at the right times prevents nasty surprises, as they can turn a healthy cash position into a shortfall in the payment month.
Real-world example A large tax payment in month 9 creates a temporary shortfall the cash budget anticipates.

Common follow-ups: Why schedule them by payment date? | What risk do they pose to liquidity?

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All 34 Cash Budgeting questions