Veterinary clinic Happy Pets is a veterinary clinic operating in Auckland. Recently John Tilley, the manager of the clinic, has been concerned about cash flow shortages, which arose quite unexpectedly in the last three months of the past year. The clinic bank account went into overdraft and incurred interest charges. Tilley believes that the main source of the cash flow difficulties is a lack of attention to outstanding client accounts and the practice of purchasing expensive veterinary supplies in large quantities at irregular intervals. Tilley has asked you to help design a spreadsheet to help with planning for client consultations, purchases of supplies, cash shortages and cash surpluses for next year. The following data are available:

Revenue is as follows:

November ................................. $200 000 ........................ (actual)

December ................................... 225 000 ........................ (actual)

January ...................................... 75 000 ........................ (budget)

February .................................... 225 000 ........................ (budget)

March ....................................... (200 000) ...................... (budget)

Required:

1. Use Excel® to create a spreadsheet to complete a cash budget for January to March of the budget year, using the format below.

2. What further steps could Tilley take to help ensure that the cash balance of the clinic remains positive? In your answer, consider ways in which budgeting may assist.

Transcribed Image Text:

Cash Budget February March January S(200 000) Opening cash balance Cash received from consultations: Two months ago Last month Current month Total cash receipts Cash payment Supplies: Previous month purchases Current month purchases Salaries Other costs Total cash payments Closing cash balance