1. GCSE Business Studies Financial Forecasting for Business
Cash Flow Forecasting & Statements

2. Learning Outcomes By the end of the lesson…
All students will be able to describe what cash flow is (Grade C)
Most students will be able to explain the 6 key cash flow terms (Grade B)
Some students will be able to complete a cash flow forecast (Grade A/A*)

3. Cash Flow Forecasting
A cash flow forecast is merely a prediction of what money will be coming into the business in the future and what money will be going out of the business in the future to pay for things

4. Money In / Money Out
CASH OUT
CASH IN

5. Cash Flow Forecasting
When a business knows how much is coming into the business and going out they can then predict how much if any profit they will make
Cash flow forecasting forewarns a business of any shortfall and helps them make arrangements to reduce spending, to borrow money or to inject capital when necessary

6. Terms Used in a Cash Flow Forecasting
The following terms are found in cash flow forecasts
Match the terms and definitions up
Task

7. CASH OUTFLOW CASH INFLOW
The amount of money left at the end of the month after all transactions
OPENING BALANCE
The amount of money in the bank at the start of the month
POSITIVE CASH FLOW
CASH INFLOW
GREATER OUTFLOWS THAN INFLOWS OF CASH
PAYMENTS OF CASH (LOAN, RENT ETC)
NEGATIVE CASH FLOW
CLOSING BALANCE
GREATER INFLOWS THAN OUTFLOWS OF CASH
AMOUNT OF MONEY COMING INTO THE BUSINESS (SALE OF ITEMS ETC)

8. GREATER INFLOWS THAN OUTFLOWS OF CASH
The amount of money in the bank at the start of the month
OPENING BALANCE
POSITIVE CASH FLOW
AMOUNT OF MONEY COMING INTO THE BUSINESS (SALE OF ITEMS ETC)
GREATER OUTFLOWS THAN INFLOWS OF CASH
NEGATIVE CASH FLOW
CASH INFLOW
The amount of money left at the end of the month after all transactions
PAYMENTS OF CASH (LOAN, RENT ETC)
CASH OUTFLOW
CLOSING BALANCE

9. Creating a Cash Flow Forecast Scenario
Complete the cash flow forecast

10. Balance brought forward 20,000
March
April
May
June
Balance brought forward
20,000
Income
Sales Revenue
100,000
125,000
130,000
80,000
Rental Income
10,000
TOTAL INCOME
EXPENDITURE
Wages
25,000
30,000
Goods for resale
120,000
70,000
Electricity
Phone
5,000
TOTAL EXPENDITURE
BALANCE CARRIED FORWARD 10

11. March
April
May
June
Balance brought forward
20,000
5,000
(15,000)
35,000
Income
Sales Revenue
100,000
125,000
130,000
80,000
Rental Income
10,000
TOTAL INCOME
140,000
EXPENDITURE
Wages
25,000
30,000
Goods for resale
120,000
70,000
Electricity
Phone
TOTAL EXPENDITURE
155,000
90,000
115,000
BALANCE CARRIED FORWARD

12. Questions
In which month might the next phone and electricity bill be due?
Explain why the business in the example might still be profitable despite the fact that it has a negative cash flow during one month?
What problems might there be for this business when attempting to forecast income & expenditure over the next few months
Think of 2 businesses that will probably have a fairly even flow of income from sales throughout the year & another 2 businesses which might only receive income from sales during 2 or 3 months

13. Is a negative cash flow balance a problem?
It maybe only temporary
and may not necessarily
cause a problem for the business

14. Why Forecast Cash Flow?
To identify when the business is likely to have a shortage or surplus of cash and what it might do about the situation
To help the business plan for the future
To provide targets for employees of the business to achieve

15. Problems and Limitations of Cash Flow
It is a forecast
The business may not have much control over some of the figures
The forecast will need updating at regular intervals

16. Practise Cash Flow task
Go to
Open the “GCW FISH&CHIPS” task.
Open a new Excel Document
Create a 12 month cash flow forecast.

17. Exam Question
Now have a go
at the exam question

18. Learning Outcomes Peer assessment
Give the person next to you a tick for each of the learning objectives that they have completed.
To be able to describe what cash flow is
To be able to explain the 6 key cashflow terms
To be able to create a simple cash flow forecast.