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Homework Objectives � �C+ Grade�Understand how a business can reduce the risk of failure by using a simple cash flow forecast and �B+ Grade�Identify solutions to cash flow problems �A+ Grade�Be able to discuss how to improve a cashflow situation by giving information, advice and guidance

Cash-flow forecasting

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Cash Flow: the bath analogy

Cash Flow “is the money flowing into and out of a business over a period of time”

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Definition

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  • So what is cash flow forecasting ?

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Cash flow forecasting = the process of estimating the expected cash inflows & outflows over a period of time

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NB. This has nothing to do with Profit

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The Weather Forecast Analogy

  • Attempts to predict how much cash we expect to have at certain points in time

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The importance of cash !

  • Cash to a business is its life blood and is as important as our blood is to maintaining a healthy and fully functioning body.

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  • What would happen to us if we lost too much blood ?

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Cashflow key term and definition match

  • Cash-flow forecasting

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  • Opening balance

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  • CASH INFLOWS

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  • CASH OUTFLOW

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  • Net cash flow

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  • Closing balance

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  • Profit

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  • The cash balance at the start

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  • receipts of cash e.g. sales, interest received, loans received
  • payments of cash e.g. purchase of items, loans repaid

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  • total cash inflows – total cash outflows over a period of time

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  • Cash balance at end of forecast period

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  • The process of estimating the expected cash inflows and outflows of a business over a period of time

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  • Amount left after all costs have been deducted from the sales income

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My Social Cash Flow Forecast

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Opening Balance

June (4W)

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0

July (5W)

AUG(4W)

Cash In

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Part time wages (income)

60

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Total Cash Inflow

60

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Cash Out

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Mobile phone

20

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Clothes

10

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Cinema / Eating out

15

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Total Cash Outflow

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45

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Net Cash Flow

15

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Closing Balance

15

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July & August

  • Pocket money £5 p/w
  • PT job at £15 p/w
  • Spend £20 on clothes
  • Two visits to pizza hut at £5 a visit
  • £20 on phone credit
  • Visit to cinema at £5 a visit

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  • No pocket money this month
  • Earn three times as much from PT job.
  • Only one trip to pizza hut and one trip to cinema
  • Decide to go onto T-mobile Solo contract at £15 p/m
  • Spend £50 on clothes for holiday in last week of school holidays

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Q. How much money will you have to take on holiday ?