When preparing a cash flow budget, you must predict the cash outflows for major purchases, such as property or equipment, vehicles, computers, or other office equipment. Major purchases are usually the result of a business expansion, a business improvement, or a business replacement expenditure. Cash outflows in this category are generally large and don't occur that often during your business year.

As the owner of your business, you are probably the best predictor of the cash outflows in this category. If you look for your business to expand during the budget period, then you probably have a pretty good feel for the additional equipment, office space, or office equipment needed to undertake the expansion. You also probably know when it's time to replace the old delivery van with a newer model, or when it's time to get rid of the old Pentium 3 PC and replace it with a new Pentium 4 PC. For more information on how to analyze major purchase decisions, see  .

 

The cash flow budget is an excellent tool to help you determine when or when not to make major purchases. If your cash flow budget shows that additional funds may be available at a certain point, this should provide you with the opportunity to make advance purchase decisions. Planning ahead may allow you to take advantage of lower prices, discounts, or better financing options. Likewise, if your cash flow budget shows that your cash supply might be a little tight, it's probably not a good idea to make a major purchase, or take on an additional monthly loan payment.