1. Cashflow forecasts
What you need to know!

2. 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

3. 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?

4. 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

5. 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

6. Labelling the Cashflow forecast
Enter the column headings

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

8. 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)

9. 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

10. 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

11. 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)

12. 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!

13. 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

14. 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

15. 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

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

17. 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

18. 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)

19. 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.

20. 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.

21. What you need to remember!
Learn the formulae!