Seasonality is a high level issue we have discussed that definitely would require more management planning and control since cash inflows and outflows can change from month to month.
QUESTIONS
1. If your business is known to be seasonal, say that you make swimsuits, do you expect that in some months of the year it will be producing more inventory than it is selling? In which months might production > sales?
2. If your business is producing more inventory in some months than it is selling, then is it quite possible that cash disbursements may be greater than cash receipts? How or why so? Example?
3. Where does external financing, such as a business line of credit or a working capital loan figure into having enough cash on hand on any given day/week/month? How would this help management in budgeted months where production > sales and cash disbursements may be greater than cash receipts?
4. If in the process of preparing the cash budget we are coming up short in the month ending cash balance, what do we do? Leave the ending month cash balance minus? Should we want to carry a minimum positive balance to start the next month? How do we fix this minus ending cash balance in our budget?