Cashflow forecasts What you need to know!

Cashflow Businesses need to have money in the bank! If a business cannot pay its debts it can be taken to court It can be made to sell some of its assets It could stop trading

Cashflow forecast Look at money coming into the business Look at money going out of the business Is there money left in the bank? If not, what can the business do?

An example of a cashflow forecast Picture House Ltd – Cash Flow Forecast Closing Balance Opening balance Net Cash Flow Payments (cash out) Dec Nov Oct Sep Aug Jul Receipts (cash in) 84 68 9 71 80 1 87 88 2 94 96 27 93 120 71 13 17 30 30 39 40 42 30 30 39 40 42 69

Starting a cashflow forecast Use Excel to create a new spreadsheet Save the spreadsheet as: ‘Picture House Cashflow 1’ Enter the title of the spreadsheet: Picture House Ltd - Cash Flow Forecast Merge cells B to E to fit the title

Labelling the Cashflow forecast Enter the column headings

Labelling the rows Enter the row labels Resize this column so the labels fit

Entering the data 1 There will be money in the bank at the start of the month This money must be entered in: Opening balance Enter the Opening balance for July as 17 (This is short for £17000)

Entering the data 2 The business must decide how much money it expects to take in (receipts) in July It expects to get £84 (£84000) Enter 84 in Receipts for July The business expects to spend £71 (£71000) Enter 71 in Payments for July

Entering a formula The spreadsheet will work out how much money the business makes in July This is called the Net Cash Flow It will do: Net Cash Flow = Revenue subtract Payments The formula is: C6 = C4 – C5 Enter the formula. It will show in the Formula bar and the answer shows in C6

Entering a formula 2 We can now see how much money is left at the end of July This goes in Closing Balance Closing Balance = Opening balance + Net Cash Flow The formula for this is C8 = C7 + C6 This can also be written as SUM (C7:C8) or Σ(C7:C8)

End of July The business can see how much money they expect to have at the end of the month They started the month with £17000 They end the month with £30000 This looks like a good month!

August If the business ends July with £30000 in the bank they must start August with £30000 Enter Opening balance for August as £30000 You can do this by copying July’s Closing balance into August’s Opening balance

Payments for August You enter this in August’s Payments The business must decide how much money it expects to take in August (£68000) You enter this in August’s receipts The business expects to spend £68000 You enter this in August’s Payments

Net Cash Flow for August You now need to work out the Net Cash Flow for August This is done by copying the formula from July

Completing August We need the Closing balance for August We can copy this formula from July

Finishing the Cashflow forecast for The Picture House 1 You need to enter data for the Receipts and Payments for September to December. Sep Oct Nov Dec Receipts 80 88 96 120 Payments 71 87 94 93

Finishing the Cashflow forecast for The Picture House 2 Copy the formulae for Opening balance and Closing balance being careful to only select the August cells (July’s opening balance does not have a formula in it)

Cashflow analysis We can now see that The Picture House will always have money in the bank and so does not have a cashflow problem.

Finishing your work You need to print a copy of your spreadsheet showing all the data. This is what a business would use to analyse its cashflow. You also need to print a copy of your spreadsheet showing the formulae for your examination. To do this go to Tools > Options >Window options and click on Formulas You may need to adjust the column widths to show all of the formulae.

What you need to remember! Learn the formulae!