A new business's first cash budget

What a new business should assume in its first cash budget about supplier credit, slow-paying customers and start-up spending, and how to track it.

By Achekam · 11 October 2026 · 5 min read · For Running a business businesses in South Africa, Nigeria, Kenya

Most first business plans are optimistic in the same three places. They assume suppliers will give the same credit they give established customers. They assume customers will pay on the day the invoice says. And they treat the cost of getting started as a single number, spent once, rather than a string of payments that land before the first sale.

A cash budget is where those assumptions meet reality. Built honestly, it tells you how much money you need before you open, when the tightest month will come, and how long you can last if sales arrive later than hoped. Built optimistically, it is the reason a profitable new business runs out of cash in its sixth month.

Why the cash budget comes first

ACCA explains that a business needs a cash budget to make sure it has enough cash to achieve the operating levels set out in its other budgets. A sales plan that needs stock, staff and premises in place first is only possible if the cash to pay for them is there in time.

ACCA also warns that a healthy profit does not necessarily mean a healthy cash flow, because labour, materials and overheads may have to be paid before the cash from sales arrives. For a new business, that gap is at its widest: everything must be paid for before anything has been sold.

No track record, no supplier credit

ACCA notes that a new company with no payment track record may be refused credit by suppliers and required to pay cash on delivery. Plan for that. In your first cash budget:

• assume stock and materials are paid for on delivery, or even upfront, for at least the first few months;
• treat any supplier credit you do get as a bonus, not a planning assumption;
• note which suppliers might extend terms after a period of prompt payment, and when you will ask them.

An Ibadan food processor buying packaging, or a Johannesburg contractor buying materials from a builders' merchant, will usually find that credit comes only after a few months of paying on time. A budget that assumes 30 days' credit from the first order understates how much cash is needed by the value of those first purchases.

Customers who pay later than you pay

The other side of the gap is customers. ACCA explains that sales revenue does not necessarily equal cash inflow, so a cash budget converts the sales budget into receipts using the agreed payment terms and an allowance for customers who never pay.

A worked example in words. A new business sells on credit and gives customers 30 days. Sales in the first month are collected in the second month at the earliest. Some customers pay in the third month. A few never pay. Meanwhile, the supplier who delivered the goods for those first sales was paid on delivery in the first month. So the first month carries a full month of costs and no receipts, and the second month still collects less than it spends if sales are growing.

When converting sales into receipts:

1. Spread each month's credit sales across the months customers actually pay, not the month you invoice.
2. Be pessimistic about how quickly new customers pay; they have no history with you either.
3. Include an allowance for sales that will never be collected.
4. If some sales are for cash or card, put those in the month of sale, less card fees.

Start-up costs and asset purchases

List every payment you must make before or soon after opening, each in the month it will be paid:

• deposits on premises, and the first rent;
• equipment, vehicles, tools and fit-out;
• registration, licences, legal and professional fees;
• opening stock;
• the first payroll, which falls before the first customer receipts in most businesses;
• marketing for the launch.

Large equipment is a cash outflow in the month it is paid for, even though in the profit budget its cost is spread over its useful life. Keep the two budgets apart in your head: the cash budget is about when money leaves the bank, not when the expense is recognised.

Setting monthly budgets from day one

Your cash budget will probably live in a spreadsheet at first. Achekam's books can carry the related profit budget from the start.

Each business on Achekam gets its own double-entry ledger, set up with a standard chart of accounts when the books first open, and accounts can be added, renamed or switched off. A business can set a budget per account and period and compare it with actual figures from its ledger. Set the monthly budgets for sales, cost of sales and each main overhead from the same assumptions as your cash budget, so that both rest on one plan.

Customer invoices, once issued, post to the ledger as debtors, sales and output VAT, so the receivables your cash budget is waiting for are visible in the books from the first invoice. Equipment can go into the fixed-asset register at cost, with monthly depreciation posted by journal, on plans that include fixed assets; the register is not part of Business Essentials.

Watching the first months against the plan

A budget earns its keep in the months after you write it. Each month-end:

1. Compare actual cash in and out with the cash budget, line by line.
2. Look at the management accounts, which show an income statement for the period beside the period before and a balance sheet at period end, and compare them with the budget.
3. Check the debtors balance against what the cash budget assumed you would have collected.
4. Redo the remaining months of the cash budget with what you have learned. If customers pay later than planned, push every later month's receipts out too.

Once trading settles, a weekly view of the next quarter helps more than a monthly one; our guide to a rolling 13-week cash forecast shows how. Businesses with heavy start-up spending can also read runway and burn.

Where to learn more

ACCA's article on cash budgets, with a worked example shows how to build one from expected inflows and outflows. Draft yours with suppliers paid on delivery and customers paying late, see how much cash the worst month needs, and arrange that funding before you open, not when the account runs dry.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.