CASHFLOW FORECAST

Question 1

Opening Cash Balance

Answer 1

The money that a business starts with every month

Question 2

Total cash inflows

Answer 2

Summation of all cash inflows

Question 3

Total cash outflows

Answer 3

Summation of all cash outflows

Question 4

Net cashflow

Answer 4

Difference between total cash inflows and outflows

Question 5

Closing cash balance

Answer 5

Estimated cash available at the enf of the month. Adding the net cashflow of one month to the opening balance of the same month.

Question 6

Benefits of Cashflow forecast

Answer 6

• Useful planning document for anyone starting a business. Provides estimated projections for future performance.
• Good support base for businesses intending to apply for funding from financial institutions. Enable the banks to check on the business’ solvency and creditwothiness.
• Can help managers identify future period where the business may need cash, and plan accordingly to it.
• Help monitor and manage cashflow.

Question 7

Limitations Cashflow forecast

Answer 7

• Its all a prediciton and can lead to inaccuracies.
• Unexpected changes in the economy
• Poor market research. Improperly done sales forecasts can have a negative effect on future cash sales, thus affecting cash inflows.
• Difficulty in predicting competitor’s behavior. Change strategies often.
• Unforseen machine or equipment failure. Can drastically affect the cash position of a business. Unpredictable.
• Demotivated employees. Reduce productivity. Reduce output and leading to less cash inflow because there are less sales.