1. CASH FLOW FORECASTS Unit 2 Business Development Finance GCSE Business Studies

2. Cash Flow Forecasts A cash flow forecast is a prediction of the money likely to come into and go out of a business over a period of time

3. Importance of Cash Flow Ensures business survival Ensures there is money coming in Ensures money is available to pay bills at the right time so that shortages do not occur Identifies times when the business may need to find a source of finance

4. Cash and Profit Cash is the money used in the business, both coming in and going out Profit is the surplus amount left when all expenses have been paid

5. Purpose of Cash Flow Forecasts To help plan expenditure To show periods of likely surplus and deficit To use as a check on spending To set targets for the business to work towards Cash flow forecasts are an essential component of a business plan

6. Cash Flow Forecast RECEIPTSJANFEBMARAPRMAYJUNTOTAL Sales1000 2000 9000 New Capital8000 TOTAL RECEIPTS90001000 2000 17000 PAYMENTS Purchases500 1000 4500 Salary600 3600 Wages400 2400 Equipment3000 Rent400 2400 Electricity 180 360 Telephone 100 200 Insurance300 TOTAL PAYMENTS5200190021802400 268016760 Opening Balance0380029001720132092010660 Add Receipts90001000 2000 17000 90004800390037203320292027660 Minus Payments5200190021802400 268016760 CLOSING BALANCE380029001720132092024010900

7. Consequences of Incorrect Forecasting Shortage of working capital Assets may have to be sold to pay expenses Targets will not be met