2.1.4 Planning

• Cash Flow forecast:

  A) inflows

  B) outflows

  C) net cashflow

  D) opening balance

  E) closing balance

  F) 20,650

  G) (2,850)

  H) 4,235

  I) 21,685

  J) (650)
• Cashflow Calculations:

  • opening balance = previous month's closing balance
  • closing balance = opening balance + net cashflow
  • net cashflow = inflows - outflows
• Cash flow : the amount of money flowing into and out of the business over a period of time

  • inflows - the receipts of cash into the business E.g. revenue
  • outflows - the payments of cash from the business E.g. supplies/rent

  cashflow problems:

  • overtrading (expanding too quickly)
  • allowing too much trade credit
  • poor credit control
  • inaccurate cashflow forecast

  Uses: help to predict risks and costs, can help to get finance

  Limitations: only a prediction, vulnerable to external risk