Cash Budget Line Items

Cash receipts and payments are those that only include within the cash planning, and therefore some sales made in the months of the budget but will be collected after the budget period and therefore are excluded when preparing the budget planning while there are purchases that are made in the months of the planning but are paid after it is excluded, vice versa, as we take into account receipts and payments for sales and purchases that were made before the planning period, but receipts or payments will be made in the months of the planning.

Cash Receipts Budget

It is all types of cash receipts which the company will collect during the budget period and it differs from one company to another according to its activity, and it is a group of various sources.

First, Cash Sales

It is the most important sources of cash receipts in which the cash discount value is excluded, as well as the value of the expected returns from gross sales to reach net sales

The cash discount rate and the rate of returns are determined in light of the company's previous experiences and knowledge, taking into account seasonal conditions and changes.

Second, Cash Receipts from Customers

The corporate selling activity is often divided into cash and credit, and in relation to the credit sale, the accounts receivable department has knowledge of the dates of collecting invoices from customers because the credit customers have specific credit periods and must pay through them, so the accounts receivable department can predict the amounts that will be collected from customers and a schedule of  cash collections ratios is prepared taking into account knowledge of the collection ratios from sales each month and when will they collect if the finance department wants to prepare a cash budget for the third quarter of the year and after the finance department does estimate the cash sales what is expected during the period, either from the sales budget in the case of preparation, or estimated based on its previous experience, and with regard to cash receipts from credit sales, it will be the result of sales of the previous period (before the third quarter) meaning credit sales for the month of April, May and June (months prior to the third quarter) and such as the schedule shown this

This schedule is the rates of expected collections from credit sales prepared by the finance department and based on the collection dates of the credit sales invoices from customers, which of course vary monthly according to the type of customers and according to the credit period and collection expected from them

In this example, the company wants to prepare a budget for the third quarter, meaning cash expected to be collected on July, August and September

The first month with us on April, in which 10% of sales will be collected during the third quarter, and if we assume that April's credit sales were 650000, then it is expected that it will be collected 65,000 Egyptian pounds about the percentages of previous months, it is assumed that they were collected in the previous budget (the second quarter budget), in the case of not collected until the end of the previous period, the amount is included that has not been collected is included in the third quarter budget until it is collected

The next month is May, and if we assume that credit sales are 750,000 Egyptian pounds, which will be collected during the third quarter is 10% on July and 10% on August, meaning 75,000 on July and 75,000 on August, taking into account the same previous idea if the expected rates were not collected during the previous period will post to the next period

The next month is June, and if we assume that the credit sales were 900000, which will be collected during the third quarter, it is 30% on July, which equals 300,000 Egyptian pounds, and 10% on August, which equals 90000 Egyptian pounds and 25% on September, equivalent to 225,000 Egyptian pounds, and also there in the previous quarter on June, the expected collections rate during the month was 40% and it is assumed that it will be collected during June, or if it did not collect during June, then it will be collected in the following months

The next month is July, and if we assume that the credit sales are 600,000, which will be collected on July, it is 40% of the month's sales, which equals 240,000 Egyptian pounds, and 30% of the July sales on August will be collected at the equivalent of 180,000 Egyptian pounds, and 25% of the sales will be collected July on September is equivalent to 150,000 Egyptian pounds, and collections are also followed up, in case the percentage is not collected in full, its value is posted to the following month

The next month is August, and if we assume that credit sales were 800,000, what will be collected from credit sales on August is 40%, equivalent to 320000 Egyptian pounds, and 30% will be collected during September, equivalent to 240,000 Egyptian pounds (in the example here 40% was collected on August And 30% on September, so 30% of August sales remain, it will be collected during the fourth quarter), it is possible on October or on November, depending on the credit period of customers

The next month is September, and if we assume that credit sales were one million Egyptian pounds, and it will be collected on September, it is 50%, equivalent to 500,000 Egyptian pounds, the rest of September sales will be collected during the fourth quarter on any of the months October, November, and December, depending on the period of collection from customers

Thus, the finance department can know and determine the cash collections from credit sales each month, in practical reality, the cash receipts budget is prepared monthly divided into weeks to prevent the lack of liquidity in the company and the cash budget must be flexible in the sense that the collections expectations limit is not high but rather it must be within the expected limits collected in light of the experience of senior management, and this can determine cash sales as well as cash receipts from credit sales during the budget period.

Financial Investment Income 

Financial investments are represented in the securities owned by the company, and the company receives revenues as a result of investing in securities and financial investments that are in shares, bonds, and revenue from investments in stock is called dividend income, the revenue generated from bonds is called bond interest, and the finance department estimates the value of returns based on the previous figures have forecasts for market conditions.

Services Revenues

It may be that the company has a service activity besides the selling activity, such as maintenance services, other operating income, or miscellaneous revenues such as renting warehouses are belonging to the company or revenue from selling spoilage& waste monthly.

Sales Revenue of Fixed Assets

In the case that the company intends to dispose of some fixed assets during the budget period, then there are revenues from the sale of these assets and the tax value imposed on the assets when sold is excluded from the value of the receipts in cash receipts budget, until the budget is accurate.

Loans & Credit Facilities

Loans& Credit Facilities that will be received from the bank according to the terms of the facility agreement or loan agreement are among the cash receipts and have been included in the budget knowing that the loans being paid are included in the cash payments budget.

Cash Payments Budget

Cash Payments Budget means all cash payments, are cash that comes out of the bank or treasury during the budget period.

Cash Purchases

These are simple cash purchases for operating supplies and they can be high or low value depending on the size of the company and according to the nature of the purchases in the company and also the company's ability to obtain credit from suppliers, cash purchases are estimated from the procurement budget and based on the previous experience of the company.

Credit Purchases

Purchases of operating supplies related to materials and inventory that are paid under the credit conditions granted to the company from suppliers, it is necessary to know the credit period granted by each supplier to know the time in which payment will be paid and also the value of the amounts paid and credit purchases represent a large proportion of the cash payments budget to any company.

Installments Loans & Interest Rate on Loans

Loans are divided into short-term loans and long-term loans and also there is the interest linked with them and long-term installment loans that are in installments for each period and short-term installment loans are in monthly installments according to the maturity of each loan and according to the system and contract for the facility loan with the bank and also there are interest linked with the loans and their payment dates to the bank and determining the value of interest is related to interest rates in the previous period, or also the company's forecasting of high-interest rates and estimating the value of interest is linked to the value of loans obtained by the company, whether they are short-term loans or long-term loans and also it is necessary to know the loans payments value are well, as there are short-term installment loans, and these are with monthly or quarterly maturities, and therefore their estimation will be by way of following up the loans maturity dates so that a fine is not imposed on the company as a result of late payment and also a follow-up of long-term installment loans and the inclusion of what will be paid during the budget period included in cash payment line items.

Wages and Salaries

Wages and salaries represent a large proportion of the total expenses of the vast majority of companies and salaries are considered to be easy to estimate their value greatly based on previous periods and make adjustments to them through the human resources department in the case of occurring adjustments.

Fixed Asset Purchases 

It is assumed that fixed assets are among the investment or capital costs incurred by the company and they are within the capital budgeting, but fixed asset purchases are one of the important line items in the cash budget because these capital payments result in the cash exit from the company, which are included in the cash budget is the only paid part and must that the finance department is aware of a sufficient period in the case of fixed asset purchases so that it can perform the financial line item, especially because fixed assets have a high cost.

Dividend Payments

Joint-stock companies that pay dividends to shareholders in periodic periods, in this case, the financial instrument must take into account when preparing the cash budget the value of the dividends, as well as the dates of their payment.

Miscellaneous Expenses

When preparing the cash budget for the period, all expenses for the company other than salaries and wages must be investigated because they are noncash expenses and all line items are analyzed for the previous periods and knowing their trends upward or downward and the dates for paying these expenses so that there is cash covered them.

Expenses are divided into

General And administrative expenses& selling and marketing expenses& operating and manufacturing expenses 

And each type of these expenses includes under it a group of line items and varies according to each company according to its activity.

Government Payments

When preparing the cash budget, government payments must be taken into consideration, such as monthly social insurance and taxes of all types, whether it is a monthly tax such as value-added tax (VAT) or income tax or each quarterly such as withholding and collection tax or an annual tax such as income tax or real estate tax and stamp duty and the rest of the government periodic fees paid by the company.