1. Cash Flow Forecasting AS Business Studies

2. Aims and Objectives Aim: Understand cash inflows and outflows Objectives: All: Recap on costs, revenues and profits All: Define cash flow forecasting Most: Distinguish between cash inflows and outflows Some: Assess the advantages of cash flow forecasting.

3. Starter Define the following: Costs Revenues Profits Describe the relationship between costs, revenues and profits.

4. 5 Mark Question Steve owns and runs a car customising business. Here are his financial figures.

5. 5 Mark Question

6. What is cash flow? Task: In groups determine a definition for cash flow. Definition: The total cash payments (inflows) into a business minus the total cash payments (outflows).

7. Why is Cash Flow Important? Round Robin Why is cash flow important? Brainstorm Ideas.

8. Importance of Cash Flow Timing of Receipts (inflows) Obtaining Finance Suppliers and Creditors Timing of Payments (outflows)

9. Cash Flow Forecasting Definition: An estimate of a firm’s future cash inflows and outflows. Essential for a businesses’ financial planning. Could be based on historical data, or primary/secondary research or predictions.

10. Cash Flow Quiz Decide whether each item is an inflow or an outflow. 1.Owners capital injection 2.Debtors Rent payment 3.Electricity, gas, water 4.Wages 5.Cash purchases 6.Loans received 7.Interest repayments 8.Raw Materials

11. Cash Inflows InflowDescription Owners Capital Money put into the business by the owner. Easy to forecast. Bank Loans Received Loans from bank, easy to forecast agreed with bank. Customers cash purchases Difficult to forecast as depends on sales. Sales forecast? Debtors Payments Payments from people who owe money. Difficult to forecast, when will debtors pay?

12. Cash Outflows OutflowsDescription RentEasy to forecast Electricity, Gas, Water Difficult to forecast as vary with customers/opening hours etc. Wages / SalariesCould differ, could be the same. Other ExpensesMaterials, etc.

13. Cash Flow Forecast Modelling Young’s Sports Ltd Sort your cards into inflows and outflows on your table. Decide on where you think each item will go on your Cash Flow Forecast

14. Cash Flow Forecast of............................................................... For the Period 01/2012 - 2/2012 JANUARY FEBRUARY Forecast CASH RECEIVED/RECEIPTS TOTAL CASH IN £ EXPENDITURE TOTAL CASH OUT £ NET CASH FLOW (TOTAL CASH IN – TOTAL CASH OUT) OPENING BALANCE CLOSING BALANCE Cash Flow Forecast Modelling

15. Plenary Define cash flow forecasting Why do you feel it is important to forecast cash flow for businesses? Level 4: What do you feel the advantages are of producing a cash flow forecast?