Business- Booklet E Cashflow Forecast
Define Opening Balance
How much is available at the start of the month
What are Total Inflows?
All inflows added together for that month.
What are total outflows?
All outflows added together for that month
Equation for Total Cash Flow
Opening Balance - Total Inflows
Equation for Closing Balance.
Total Cah Avaliable - Total Outflows
Equation for Net Cash Flow
Cash Inflows - Cash Outflows
What is a Cashflow forecast?
Aim to predict the money flowing in/out the business.
4 uses of a Cashflow Forecast.
1. Planning
2. Monitering
3. Target Setting
4. Control
Benefits of Cashflow forecast
-Helps predict cashflow problems, able to plan overdrafts/loans
-Track inflows & outflows
Limitations of a Cashflow forecast.
-Not fully accurate
-Changes can impact accuracy e.g. cost of materal
-Sales usually significantly lower then expected
Ways to improve cashflow forecast
-Reduce unnecessary expenses
-Sell assets
-Set targets
-Request extension on overdraft if needed
Whys Planning important for Cashflow forecast?
Used to put a plan in place, wether to reduce outflows or get a loan.
Whys monitering important in a Cashflow forecast?
Monitered closely in line with actualy cashflow so predictions are more accurate.
Why is control important for a cashflow forecast?
In areas of concern, business can increasing inflows or reducing outflows.
Why is setting targets important for a cashflow forecast?
Set targets based on forecast
Encourage employees