Why is cash budgeting particularly important to a rapidly expanding company?

Risky Rolling, Inc. is a rapidly expanding manufacturer of skateboards that have been modified for use on ski slopes during the off-season. This year’s sales are consideraly higher that last years sales, and salses are expected to double next year. The unexpected growth in sales has presented numerous challenges to the company’s management team and the stress is really starting to show. Laura Dennan, the company;s president, believes that the management time required to prepare a cash budget should be devoted to other, more pressing matters.

Cash is the lifeblood of any business. It is simply not possible to pay employees and suppliers that are necessary to run the business without access to cash. If employees and suppliers are not paid, the whole operation can come to a screeching halt whether the company can sell its products or not. Managing cash is a critical business function for any company, but is especially important for a start-up.