interpreting cash flow forecasts]

• What is a cash flow forecast?

   a prediction of the anticipated cash inflows and  cash outflows, typically for a six to twelve month period
• where should cash flow forecast be included

  A detailed business plan - allows the business owners to identify its financial needs
• How is the net cash flow forecasted

  Total outflows - total inflows
• What is the opening balance

  the previous month’s closing balance carried forward
• How is the closing balance calculated

  adding the net cash flow to the opening balance
• Advantages of cash - flow forecasts?

  Cash flow forecasts can support an application for a loan and are an integral part of the business plan

  They can help identify where the business may experience cash shortfalls or cash surpluses so that plans can be made to manage these periods

   Cash flow forecasts aid planning and help a business avoid costly mistakes
• Disadvantages of cash flow forecasts

  Forecasts are usually based on estimates and in reality inflows and outflows may differ significantly from the estimates

  
  

  Cash flow forecasts require appropriate skills, insight, research and time to prepare and update sufficiently

  
  

  External factors that can impact inflows and outflows may not be reflected in the cash flow forecast