Entrepreneur's Handbook

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Entrepreneur's Handbook

BUDGETING AND ESTIMATION

 

The budgeting activity begins with the sales forecast. Production, expense, cash etc. budgets follow this forecast.

The cash budget is important in terms of preparing for a possible future cash need and evaluating alternatives in order to evaluate cash surpluses.

Example:

For the r@ktas business, a cash budget covering the period January, February and March is required. For this purpose, the financial manager has collected the following information. Let's prepare the cash budget of the business for the first quarter based on the information gathered.

  • 50% of the sales are made in cash, 50% by credit.
  • 80% of the sales on credit are made with 1 month, 20% with 2 months.
  • Raw material purchase is 100,000.-TL at the beginning of each month, 60% of which is paid in advance and 40% is paid after 1 month.
  • The remaining amount of the 350.000 TL machine purchased by paying 150.000.-TL in cash in November will be paid in January and March in 2 equal installments.
  • Salaries and wages are 20,000, 15,000 and 15,000 TL in January, February and March, respectively. It will be paid within the month of commitment.
  • 000.-TL rent is paid every month.
  • It has been estimated that other expenses will reach 5% of monthly sales.
  • 000 TL income tax will be paid in March.
  • Cash Amount at the Beginning of the Period is 150.000.-TL.

SOLUTION:

Sales Budget

Purchase Budget

Machinery Purchase and Tax Payment

General Expense Budget

Cash Flow Budget

As you can see, cash needs are determined on a monthly basis for the 3-month period.