Cash flow

• What is cashflow forecast?


  A prediction of the amount of money in and out of the business over a period of time.
• What is opening balance?


  The balance of cash at the start of the month.
• What is closing balance?


  The balance of cash at the end of the month.
• What is the link between opening and closing balance?

  The closing balance of the previous month is the opening balance for the next month.
• What is net cashflow?

  Cash inflow - Cash outflow
• What are debtors?

  People that owe a business money
• What is budget?

  A financial plan for a future period of time.
• When is a business insolvent?

  When the business is unable to pay it own bill.
• What is cash flow?

  The money avalible in the business' bank accounts
• What are the main cash payments a business makes?


  Payments to suppliers

  Payments to employees

  Overheads, such as rent, electricty and telephone bills
• What is a credit arrangement with suppliers?


  When the business can get raw materials but pay for it on a later date, normally within 30 days.
• How can a business get out of a negative cash flow?

  Negotiate an overdraft

  Keep costs under control

  Keep cash coming into the business (having fewer customers pay on credit)
• When are two instances a business has a negative cash flow and why?


  At start-up - large amount of money needed to be invested to get business started

  During rapid growth - when the business needs to grow quickly but can't keep up with the cash being paid out. (E.g. finding a larger premises)