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Understanding Cash Budgets. A cash budget is used to estimate the cash inflows and cash outflows anticipated by a company over a period of time. Budgets are often looked at over a 1-month, 3-month or 12-month time period.
All businesses need to maintain a safe level of cash to enable them to carry on business activities. The managers of a business need to determine that safe level. The cash budget is then prepared by taking into consideration, that safe level of cash.