Budgeting & Forecasting › Cash Budgeting
How does inventory purchasing policy affect the cash budget?
IntermediateAnswer
Building inventory ahead of demand ties up cash early (large purchase payments before sales cash arrives), while lean/just-in-time purchasing smooths and reduces cash outflows. The cash budget reflects the chosen policy's timing, so aggressive stock-building shows as an early cash drain.
Real-world example Pre-building stock for a peak season creates a cash outflow months before the sales receipts come in.