Excel_budgets_part_4

Excel_budgets_part_4 - BUDGETING Part 4 of 6 Excel-Based...

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Budgeting. It seems that no matter how much we talk about it, how much time we put into it, or how much emphasis we give it, our colleagues still don’t see its beauty and usefulness! But we want to change that. This is the fourth in a series of six articles describing a detailed, Excel-based budget that can quickly and easily provide updated information to managers, supervisors, board members, and external stakeholders. This kind of budget can make even long-time budget critics acknowl- edge what a useful tool a budget can be! Creating such a budget takes a considerable amount of time and effort, but the rewards are well worth it. When you’re finished, you’ll have a budget that can quickly and easily be updated from year to year and from situation to situation. As new information is provided, new assump- tions or policies are made, and just a few quick adjust- ments in one place will push new information through- out this powerful budget. In this article, we continue working through our example by creating the first summary budget: the Cash Budget. Unlike the groundwork budgets that we discussed in earlier articles, the Cash Budget doesn’t provide the details of your operations (like the Production, Direct Materials, and Direct Labor budgets do), nor is it a Pro Forma Financial Statement. Instead, it calculates how much cash you’ll have on hand at the end of the period. This focus allows you to determine how much, if any, additional financing your company will need to maintain operations or how much previous financing your compa- ny can repay. Therefore, the Cash Budget is an invaluable tool for both the finance department and upper manage- ment. Senior managers and owners need to know the 34 STRATEGIC FINANCE I May 2010 BUDGETING Excel-Based Budgeting for Cash Flows: Cash Is King! By Teresa Stephenson, CMA, and Jason Porter Part 4 of 6
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May 2010 I STRATEGIC FINANCE 35 Figure 1: Cash Budget
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details of operations and profitability of the company, of course, but their primary short-term goal is to assess how well the company is making money and how they can generate more. Thus the old saying, “Cash is king!” In order to provide senior management and owners with this information, the Cash Budget pulls data from the budgets we’ve already discussed: the Data Input Sheet, the most fundamental part of the budget; the Cash Collections Schedule; the Cash Disbursements Schedule; the Direct Labor Budget; the Manufacturing Overhead Budget; and the Selling and Administrative Budget. Though these budgets, as well as the others we’ve already discussed, provide a great deal of useful information for your marketing, collections, purchasing, and production departments, it’s the Cash Budget, as well as the Pro For- ma Financial Statements that we’ll introduce in the next article, that pull together all of this groundwork to pro- vide information for top management. We’ll give you a minute to open Excel and pull up your
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This note was uploaded on 09/29/2011 for the course ACCT 305 taught by Professor Franz during the Spring '07 term at S.F. State.

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Excel_budgets_part_4 - BUDGETING Part 4 of 6 Excel-Based...

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