Putting up a simple cash budgeting system: Steps to follow

cash

You are convinced cash budgeting is essential for you to run an efficient and sustainable business.  You realize that simply keeping a cash drawer to cover small everyday expenses  is  inadequate and inefficient.

Ready to implement a simple cash budgeting in your company? Here are steps to follow:

 

1.

Add all cash expenses made over a period of time, such as one to three months, to your expenses ledger. If you are doing this already, you can work backward from your current records and proceed immediately to the next step.

2.

Tally up the total amount of such expenditures made on a weekly or monthly basis, and average them out over the period you are considering. For example, if your cash expenditures over a three-month period are PhpP157,000, 318,000, and 98,000 your average expenditures over this time are Php191,000 per month.

3.

Determine whether any payments currently being made with cash should be made with a more formal payment system. If your business makes recurring cash payments of large amounts–however you define “large” for your business–then these should not be accounted from the cash cash drawer, even if you continue to make these payments in cash.

4.

Decide whether you want your budget to simply track your expenses, or if you want to set a hard limit on the amount of money spent from the cash drawer. If you are just tracking expenses, use the monthly average as your budget amount. If you wish to set a hard limit, determine what hard limit to use based on your prior amounts. For example, some businesses may consider Php190,000 in one month to be acceptable, and may budget for 200,000 a month as a hard limit–others may use this accounting to say that this is too much, and set 150,000 as their hard limit.

5.

Transfer a specific amount of funds to your cash drawer as decided in Step 4. If you have a hard limit, transfer only those funds, and make clear to all employees that all other payments should not be made from any other source; many employees may be in the habit from past business procedures to take such payments out of a cash register, or to make them out of pocket and expect reimbursement later. This is a major drawback of the hard limit method, as it takes away the initial convenience of using a cash drawer in the first place.

Photo: from freedigitalphoto.net

 

 

 

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