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What can management do with a forecast cash surplus? How does the cash budget link to working capital management? How do capital expenditure and financing appear in the cash budget? How do bad debts affect cash receipts in the cash budget? How does a cash budget help decide on financing arrangements? How do tax and dividend payments feature in the cash budget? How does inventory purchasing policy affect the cash budget? What actions can improve the cash position shown in a cash budget? How do you treat capital receipts (asset sales, share issues) in the cash budget? What is the difference between the receipts-and-payments method and the adjusted-profit method of cash forecasting?
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How are settlement discounts reflected in the cash budget?

Intermediate

Answer

If customers take early-payment discounts, cash received is less than the invoice value, and if the business takes supplier discounts, payments are lower. The cash budget uses the net cash actually expected to move, phased to the (earlier) discount payment dates, reflecting both the reduced amount and the timing change.
Customer pays early: receive 98% of invoice instead of 100% one month later.
Real-world example Offering a 2% early-payment discount brings cash in sooner but at 98% of face value in the budget.

Common follow-ups: How does a discount change timing? | How does it change the amount?

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All 34 Cash Budgeting questions