1. BUSS 1 Financial planning: using cash-flow forecasting

2. Using cash-flow forecasting Candidates should be able to: define cash and cash flow list possible sources of information for a cash flow forecast amend or complete a cash flow forecast evaluate why businesses forecast cash flow

3. Definition of cash and cash flow What is cash? What is cash flow? NOTE it is NOT the same as p_____

4. Cash inflows What are cash inflows? What is the main cash inflow? Why is it called cash inflows?

5. Cash outflows What are cash outflows?

6. The importance of cash flow Why is cash flow important to a business? Just because a firm is making a profit it does not mean that it can pay its bills. Why?

7. Forecasting cash flow What is a cash flow forecast?

8. How to forecast cash flow: cash inflows Start by forecasting the inflows (receipts): o______ o___ f______ b____ l_____ c____ d________ (customers who have bought goods on credit and will pay cash at a later, agreed date) g____________ g_______

9. How to forecast cash flow: cash outflows Then forecast the outflows:

10. The structure of cash flow forecasts Cash flow forecasts are drawn up as a table showing cash in, cash out, net cash flow, opening balance and closing balance Net cash flow is ______________________ ___________________________________ Net cash flow = cash in – cash out

11. The structure of cash flow forecasts Opening balance = cash held by the business at the start of the time period (e.g. a month) Closing balance = cash held by the business at the end of each time period.

12. A cash flow forecast; example Complete and comment on this cash flow: What do you notice about the bottom two lines? JanuaryFebruaryMarch Cash inflowPersonal funds20000 Cash sales5200600 TOTAL CASH IN205 Cash outflowRent100 materials200150300 TOTAL CASH OUT300 Net cash flow-95-50200 Opening balance0-95-145 Closing balance-95-14555

13. A positive cash flow forecast What does a positive cash flow mean?

14. Why do businesses forecast cash flows (what are the benefits)?

15. What are the limitation of cash flow forecasts? Remember it is a FORECAST