Sales Forecasting

• Formula 


  Net Cash Flow + Opening Balance = Closing Balance

  Closing Balance is next months opening balance

  Net Cash flow = inflow - outflow
• Cash Flow Forecasting Usefullness

  • helps you predict when you may have liquidity problems
  • e.g cash issues inflows<outflows- liquidity issues
  • e.g to much mass inflows>outflows - opp cost of not using money as it’s just sat in bank so use it to expand
  • anticipate cash flow problem to manage cash flow issues e.g sources of finance needed? or expand if to much cash
• Reasons for Cash Flow Issues

  • poor sales - rev down - cash flow down
  • over trading - to much stock - cash down
  • debtor/creditor agreement - paying creditors in 20 days but getting debt payed two you in 60 days
  • no cash flow forecasting - poor business management
  • WHY POOR CASH FLOW IS A ISSUE
  • not enough cash for day2day expenses e.g bills due to lack of working capital (CA-CL) if negative
  • cannot pay worker - poor motivation- low productivity
  • indicates need for sources of finance - comes with cost e.g interest
  • creditors wary of giving credit to you - reduce the time you have to pay
• Rescheduling Payments Solutions 


  • Increase speed of receiving cash inflows e.g. payments
  • May lose sales due to this
  • Decrease speed of outflows
  • May damage relationship with suppliers
• Increase Cash Inflows solutions

  • Run a marketing campaign to increase sales
  • Increase selling price
• Decrease Cash Outflows solutions 


  • Destock - hold less stock
  • Storage costs fall
  • Less stock - less sales and revenue
• Sources of finance solutions

  • Quick and easy to sort to resolve unexpected expenditures
  • Interest could be paid on top so even more outflows when repaying