Financial Budgets outline how an organization is going to acquire its cash and how it intends to use the cash. Three important financial budgets are the cash budget, capital expenditure budget and the balance sheet budget.
- Cash budget
- Cash budgets are forecasts of how much cash the organization has on hand and how much it will need to meet expenses. The cash budget helps managers determine whether they will have adequate amounts of cash to handle required disbursements when necessary, when there will be excess cash that needs to be invested, and when cash flows deviate from budgeted amounts.
- Capital Expenditure Budget
- Capital Expenditure Budgets. Investment in property, buildings and major equipment are called capital expenditure. Such capital expenditure budgets allow management to forecast capital requirements, to on top of important capital projects, and to ensure the adequate cash is available to meet these expenditures as they come due.
- The balance sheet budget
- The balance sheet budget plans the amount of assets and liabilities for the end of the time period under considerations. A balance sheet budget is also known as a pro forma (projected) balance sheet. Analysis of the balance sheet budget may suggest problems or opportunities that will require managers to alter some of the other budgets.