2.1.4 Planning

• Cash-flow forecast


  A month-by-month prediction of timings expected cash inflows, outflows and balances for a business.
• Inflows


  The money coming into the business
• Outflows


  The money leaving the business
• Net cash flow


  The result of inflows minus outflows
• Opening balance


  What is in the bank on the first day of the month
• Closing balance


  Opening balance + Net cash flow
• Sales forecast


  An estimation of future sales that may be based on previous sales figures, market surveys and trends on managerial estimates.
• Variable Costs


  a cost that rises as output rises. Examples include wages and cost of materials
• Fixed costs / Indirect costs / Overheads


  The costs that are unaffected by the amount of output. Examples include tax, salary and insurance.
• Contribution


  The amount each sale provides towards fixed costs or profit.
• Break even Point (BEP)


  The level of output at which Total Revenue is the same as Total Costs.
• Margin of Safety


  difference between your actual or expected profitability and the break even point
• Budget


  A financial planning for the future that sets out targets to be met, the costs of achieving them and how that spending might be financed.
• Extrapolation


  Assuming that past trends will continue into the future.
• Zero-based budgeting


  A budget with no assumptions based from experience.
• Historical budgeting


  A budget made from previous years of experience.
• Variance


  The difference between a budgeted figure and the actual figure.