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Title: Business Studies: Cash Flow Forecast
Description: This is for those who want to recap/learn cash flow forecast, hence the name. Aimed at individuals doing GCSE Business or 15-16 year old basically.
Description: This is for those who want to recap/learn cash flow forecast, hence the name. Aimed at individuals doing GCSE Business or 15-16 year old basically.
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The Cash Flow Forecast
Forecast
A Cash Flow Forecast is a form of budget
This is a VERY important business document
It will show when cash is expected to flow into and out
of a business over a period of time
Inflows are
Inflows are
money received
money received
from customers
from customers
and other sources
and other sources
Examples
• Sales of products
• Capital from the
owners
• Bank Loans
• Grants
Outflows are
Outflows are
money paid to
money paid to
suppliers
suppliers
Business
Examples
• Payment to suppliers
• Rent and Rates
• Wages and Salaries
• Power
• Advertising
© Business Studies Online: Slide 1
Why Bother with Cash Flow?
Flow?
Banks can see how money is
flowing in the business
...
The business must make sure that there is always
cash available
Eg the bath should never be allowed to run empty!
© Business Studies Online: Slide 3
A Cash Flow Forecast
Forecast
A cash flow
forecast is a table
that summarises
the money
coming in and
going out
Each month has
it’s own column
Each column has
3 parts:
© Business Studies Online: Slide 4
The Sections of a Cash Flow Forecast
Forecast
Receipts
(or inflows)
is money
coming in
Payments
(or outflows)
is money
going out
Net In/Out
Flow is the
difference
between the 2
© Business Studies Online: Slide 5
A Worked Example
Money In (Revenue)
Jan
Feb
Mar
Apr
May
Jun
Months
Cash Sales
1200
1300
1600
1550
1700
1800
Credit Sales
0
500
700
650
600
650
Monthly Income Figures
1200
1800
2300
2200
2300
2450
Total
Monthly Total
Money Out (Costs)
Rent
500
500
500
500
500
500
Raw Materials
200
300
700
100
400
300
Wages
800
800
800
800
800
800
Repayments
100
100
100
100
100
100
Total
1600
1700
2100
1500
1800
1700
Net Flow
(400)
100
200
700
500
750
Bank B/F
0
1100
1100
1850
(400)
Balance C/F (400) (300) (100) 600
Monthly Cost Figures
Monthly Total
© Business Studies Online: Slide 6
Golden Rules of Cash Flow
Flow
Money is only recorded when
cash changes hands
It tells us NOTHING about profit
A profitable business can have poor
cash flow, and still go bankrupt
The closing balance of one month
is the opening balance of another
month
A negative closing balance DOES
NOT mean that the firm is
bankrupt!
© Business Studies Online: Slide 7
Advantages & Disadvantages
© Business Studies Online: Slide 8
Title: Business Studies: Cash Flow Forecast
Description: This is for those who want to recap/learn cash flow forecast, hence the name. Aimed at individuals doing GCSE Business or 15-16 year old basically.
Description: This is for those who want to recap/learn cash flow forecast, hence the name. Aimed at individuals doing GCSE Business or 15-16 year old basically.