1. Cash Flow Forecasting AS Business Studies

2. Aims and Objectives Aim: To understand how to construct a cash flow forecast Objectives: All Will: Define cash flow forecasting All Will: Create a cash flow forecast Most Will: Explain a cash flow forecast Some Will: Analyse the benefits and problems of cash flow forecasting

3. Starter Define cash flow. Define cash flow forecasting Define Receipts Define Expenditures

4. Create Your Own Cash Flow Forecast In groups Pick one of the following businesses: 1) Nightclub 2) Clothing Store 3) Sports Club 4) Entertainment Store Sort through the inflow and outflow items, ticking ones suited to your business. Complete cash flow template using figures from the Cash Flow packs. Report back to the group on the financial situation of your business at the end of February.

6. Advantages and Problems Round Robin Advantages and Problems of Cash Flow Forecasting

7. Advantages of cash flow forecasting By indicating times of negative cash flow, the business can plan to provide extra finance during these times. 1 If negative cash flows appear too great, plans can be made for reducing this, E.g. reducing outflows. 2 Needed for a business proposal, to obtain investment. 3

8. Problems of cash flow forecasting Mistakes can be made in preparing forecasts, if created by inexperienced people. 1 Unexpected cost increases can lead to major inaccuracies in forecasting. E.g. Cost of raw material increases 2 Wrong assumptions can be made in estimating the sales, perhaps based on poor sales forecasts or market research. 3

9. How Useful Are Cash Flow Forecasts? Only truly useful if: The data used to make them is accurate, and not subject to change in the short term.

11. Answers 1.27,300 (Net Cash Flow) - £1,700 (Closing Balance) =£25,600 2.49,800 (Cash Inflows) - 59,400 (Cash Outflows) = (9,600)