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    2 DQ 2 Cash Budget & Uncertainty (18.01.2021)

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    Hasnain Haider
    Three elements that can cause uncertainty in a company's cash budget are: 1) erratic collection patterns from customers, 2) potential cost overruns, and 3) fluctuating revenues. As CFO, techniques to cope would include maintaining adequate liquidity through a cash reserve, fixed income portfolio, or line of credit. While the techniques are the same for large and small companies, larger companies have greater dollar needs to manage.

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    2 DQ 2 Cash Budget & Uncertainty (18.01.2021)

    Uploaded by

    Hasnain Haider
    357 views2 pages
    Three elements that can cause uncertainty in a company's cash budget are: 1) erratic collection patterns from customers, 2) potential cost overruns, and 3) fluctuating revenues. As CFO, techniques to cope would include maintaining adequate liquidity through a cash reserve, fixed income portfolio, or line of credit. While the techniques are the same for large and small companies, larger companies have greater dollar needs to manage.

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    Three elements that can cause uncertainty in a company's cash budget are: 1) erratic collection patterns from customers, 2) potential cost overruns, and 3) fluctuating revenues. As CFO, techniques to cope would include maintaining adequate liquidity through a cash reserve, fixed income portfolio, or line of credit. While the techniques are the same for large and small companies, larger companies have greater dollar needs to manage.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    357 views2 pages

    2 DQ 2 Cash Budget & Uncertainty (18.01.2021)

    Uploaded by

    Hasnain Haider
    Three elements that can cause uncertainty in a company's cash budget are: 1) erratic collection patterns from customers, 2) potential cost overruns, and 3) fluctuating revenues. As CFO, techniques to cope would include maintaining adequate liquidity through a cash reserve, fixed income portfolio, or line of credit. While the techniques are the same for large and small companies, larger companies have greater dollar needs to manage.

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    Describe three elements that can cause uncertainty within an enterprise’s cash budget and

    provide your rationale for including each element. If you were the CFO of a company,
    what techniques would you use to cope with this uncertainty? How might your coping
    strategies differ when managing a large company (1,000+ employees) versus a significantly
    smaller company (100+ employees)?

    A cash budget is an estimation of the cash flows of a business over a specific period. It could be
    weekly, monthly, quarterly or annual budget. The cash budget is useful to assess whether the
    entity has sufficient cash to continue its operations over the given time frame. The cash budget
    provides a company insight into its cash needs. It also helps to determine an efficient allocation
    of funds.

    Uncertainty within a cash budget is affected by several elements/factors including, erratic


    collection patterns, cost overruns, and fluctuating revenues. The first factor, erratic collection
    patterns, can be problematic during difficult times. It can mitigate the utilization of credit
    analysis and strategic payment terms. The second factor, cost overruns, is also a problem for any
    organization. It can mean the difference between long-term viability and bankruptcy. Mitigating
    cost overruns calls for management and an effective budgeting process. The third factor is
    fluctuating revenues that can have a dramatic impact on cash inflows. It tends to be the most
    problematic during economic downturns. A resilient business plan with multiple sources of
    income/revenue is one way to mitigate this.

    In addition to the techniques noted above, if I were the CFO of a company with either 1,000 plus
    employees or a small company with 100 plus employees, my company always has access to
    adequate liquidity. Because this could take the form of a cash reserve, high quality fixed income
    portfolio or a revolving line of credit. This technique applies to both large and small
    organizations. The only difference is that large organizations need more dollar needs as compare
    to small organizations.
    BIBLIOGRAPHY

    https://www.investopedia.com/terms/c/cashbudget.asp
    https://www.wisdomjobs.com/e-university/working-capital-management-tutorial-360/sources-of-
    uncertainty-in-cash-forecasting-12003.html

    https://books.google.com.pk/books?
    id=7pNVYaQldtkC&pg=PA92&dq=three+elements+that+can+cause+uncertainty+within+an+en
    terprise
    %E2%80%99s+cash+budget&hl=en&sa=X&ved=2ahUKEwjM1uyb_qXuAhXSi1wKHZlkBV8
    Q6AEwAXoECAAQAg#v=onepage&q=three%20elements%20that%20can%20cause
    %20uncertainty%20within%20an%20enterprise%E2%80%99s%20cash%20budget&f=false

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