Cashflow Forecasting

• What is a cashflow forecast?

  Cashflow forecasting predicts the movement of money in and out of a business.
• Cashflow Forecast Uses:

  Planning: Helps to plan how to utilise cash and to mange months where there maybe negative cashflow.

  Monitoring: Cashflow forecasts need to be monitored closely in line with actual cash flow of the business.

  Control: A businesses can not control cashflow issues until they happen.

  Target Setting: Allows a business to set targets based on the cashflow forecast
• Solutions to Cashflow problems:

  • Overdraft arrangements
  • Negotiating terms with creditors
  • Review and reschedule capital expediture
• Benefits of Cashflow forecasting:

  • Allows the business to track inflows and outflows
  • Helps monitor cashflows and anticipate where corrective action needs to be taken.
  • Can be used as apart of a business plan to help secure finance.
  • Track whether actual spending is close to your cash flow forecast
• Limitations of Cashflow forecast:

  • A forecast may not always be accurate
  • Unforeseen changes can impact the forecast, e.g such as change in material costs or COVID Lockdown.
  • Sales can be significantly lower than expected.
  • Takes time to produce.