CASH FLOW FORECASTS Unit 2 Business Development Finance GCSE Business Studies

Cash Flow Forecasts A cash flow forecast is a prediction of the money likely to come into and go out of a business over a period of time

Importance of Cash Flow Ensures business survival Ensures there is money coming in Ensures money is available to pay bills at the right time so that shortages do not occur Identifies times when the business may need to find a source of finance

Cash and Profit Cash is the money used in the business, both coming in and going out Profit is the surplus amount left when all expenses have been paid

Purpose of Cash Flow Forecasts To help plan expenditure To show periods of likely surplus and deficit To use as a check on spending To set targets for the business to work towards Cash flow forecasts are an essential component of a business plan

Cash Flow Forecast RECEIPTSJANFEBMARAPRMAYJUNTOTAL Sales New Capital8000 TOTAL RECEIPTS PAYMENTS Purchases Salary Wages Equipment3000 Rent Electricity Telephone Insurance300 TOTAL PAYMENTS Opening Balance Add Receipts Minus Payments CLOSING BALANCE

Consequences of Incorrect Forecasting Shortage of working capital Assets may have to be sold to pay expenses Targets will not be met