COLLABORATIVE LEARNING PAPER MANAGEMENT ACCOUNTING

THE CASH BUDGET

Aulia Uswah Affani Erika Damayanti Febrina Elissa Nadya Restu Mayestika

CHAPTER I PREFACE
A budget is a plan. It is a plan for owners and managers to achieve their goals for the company during a specific time period. A cash budget can protect a company from being unprepared for seasonal fluctuations in cash flow or prepare a company to take advantage of unexpected quantity discounts from suppliers. Cash budget include two parts, which are operational budget and financial budget. Financial budget consists of the capital expenditure budget, the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows. Our focus is to explain about cash budget. A cash budget is a management plan for the most important factor of a companys viability, its cash position. A companys cash position determines how suppliers will be paid, how a banker will respond to a loan request, how fast a company can grow, as well as directly influencing dividends, increases to owners equity, and profitability. Cash Budget determines minimum cash and additional cash which obtained from loan and equity. Many small businesses find it helpful to prepare monthly cash budgets and to analyze any variances between the budgeted and actual amounts on a monthly basis. This enables small business owners and managers to stay on top of any unexpected cash uses. Cash budget is a planning tool use for management decision. In this paper, we explain more about cash budget, how to create a simple cash budget and to analyze it. This paper will be use as a guidance for Collaborative Learning section in Accounting Management course, about Master Budgeting.

CHAPTER II THE CASH BUDGET

2.1 What is Cash Budget?
Some opinions regardless the meaning of cash budget :
1. Bambang Riyanto says that Cash budget is an estimation of cash position for some period time. 2. Erich A. Helfert says that cash budget is a monthly planning or weekly planning which very specific, usually arranged by a company's financial staff.

3. M. Munandar says that cash budget shows more detail about amount of cash and its
change from time to time, whether changes in the form of cash, or in the form of cash receipts.

From above explanation, we conclude that cash budget is a plan showing cash receipts and disbursements to know whether a company will receive a surplus or deficit for the coming period.

2.2

Purpose of Cash Budget

In general, the purposes of cash budget by Alwi, S are : 1. Can be used to anticipate the need for deficit and surplus fund. 2. To achieve companys goals and determine companys sucess. 3. Can be used as a tool to integrate and coordinate activities.

A cash budget also allows you to evaluate and plan for your capital needs. The cash budget will help you assess whether there are periods during your operations cycle when you might need short-term borrowing. It will also help you assess any long-term borrowing needs. Basically, a cash budget is a planning tool for management decisions.

2.3

How to Create a Cash Budget

Here is an example of a cash budget for a small business:

There are three main components necessary for creating a cash budget. Time period That is, are you preparing a budget for the next three months, six months, twelve months or some other period?

 Desired cash position The amount of cash you wish to keep on hand will depend on the nature of your business, the predictability of accounts receivable, and the probability of fast-happening opportunities that may require you to have a significant reserve of cash. Your budgeting process will help you to determine if, at the end of the period, you have an adequate cash reserve. Estimated sales and expenses how to prepare a cash budget The fundamental concept of a cash budget is estimating all future cash receipts and cash expenditures that will take place during the time period. The most important estimate you will make, is an estimate of sales. Once this is decided, the rest of the cash budget can fall into place.

The following categories of expected cash receipts and expected cash payments should be considered: 1. Expected Cash Receipts Cash receipt generally come from : Cash balance. The cash balance is your cash on hand. This includes what is in your checking accounts, savings accounts, petty cash and any other cash accounts that you might have. Cash sales. After arriving at a base figure of cash sales, it must be adjusted for any trade or other discounts and for possible returns. As stated previously, the base level of sales (and of accounts receivable) will be determined by the companys projections, goals and past experience. Collections of accounts receivable. After a base level of accounts receivable is established, it must be adjusted to reflect the amount that will actually be paid during the time period. Typical adjustments for a small business might be to assume that 90 percent of accounts receivable will be collected in the quarter in which the sales occur, nine percent will be collected in the following quarter, and one percent will remain uncollectible. Other income (interest income, rent income, dividend, etc)

2. Expected Cash Expenses Cash expenses come from : Raw material (inventory). For small business retailers and manufacturers, the largest cash expense is usually the amount spent for inventory or raw materials. Past experience will be your best indicator of future cash outlays. Payroll Manufacturing overhead cost Income tax Buying fixed assets

3. Other Direct Expenses: Advertising. Include any expenses for print (brochures, mailers, and newspaper ads), radio, or other advertising services. Selling expenses. Typical selling expenses include salaries and commissions for sales personnel and sales office expenses. Administrative expense. Include your utilities, telephone, copying and day-to-day office expenses. Plant and equipment expenditures. Cash payments for equipment loans, mortgages, repairs, or other upkeep. Other payments. If there are any cash payments you expect to make that are not covered in the above listing, include them here.

Step 1: Create a cash flow budget for your company for a threemonth period. Here is a cash flow budget worksheet for a small business:

Step 2: If the data is available, construct a budget versus actual report for your business. Below is a sample month-end budget versus actual report :

Cash expenses for payroll, advertising and plant and equipment exceeded the budgeted amounts . And because the company analyzes these figures monthly, changes can be made before the increased expenses become unmanageable. The use of a budget versus actual report allows owners to pinpoint how actual cash inflows and outflows vary from expectations and to make adjustments.

2.4

Cash Budget Form

Each company has the freedom to determine which form and format of cash budget will be used. Because of that, cash budget consists of 2 sectors, cash receipt and cash disbursements, so before arrange a cash budget, we have to make a cash inflow schedule and cash outflow schedule.

CHAPTER III CONCLUSION

With the cash budgeting, we will know when our company face a deficit or surplus that happens because of company activities. By knowing cash deficit, it can be planned to determine the source of funds will be used to cover the deficit. Because if we already make a cash budget, there are more alternative sources of funding, and there are more alternative sources of funding, we can preselect the source of most low-cost funds. In contrast, with knowing that there will be a surplus, we can make a plan how to use the excess funds efficiently.

RESOURCES
Charles, Srikant, George dkk. Cost Accounting : A Managerial Emphasis. Thirtheenth Edition. Pearson Prentice Hall. Siregar, Narumondang Siregar. Penyusunan Anggaran Perusahaan Sebagai Alat Manajemen Dalam Pencapaian Tujuan. Websites: http://id.shvoong.com/writing-and-speaking/presenting/2063181-pengertian-cash-budget anggaran-kas/ http://id.shvoong.com/writing-and-speaking/presenting/2063183-kegunaan-cash-budget/ http://www.accountingformanagement.com/cash_budget.htm http://www.cliffsnotes.com/study_guide/Cash-Budget.topicArticleId-21248,articleId21236.html http://www.scribd.com/doc/12781553/25/Bentuk-Anggaran-Kas http://www.va-interactive.com/inbusiness/editorial/finance/ibt/cash_bud.html https://www.zionsbank.com