Cash Flow Forecasts Flashcards
(14 cards)
What is a cash flow forecast
A predictions of a business future inflows and outflows. DOES NOT SHOW PROFIT
Receipts
How much a business recieves each month
Payment / expenditure
How much a business spends each month eg rent
Net cash
Difference between a business inflow and outflow of cash each month
Opening cash
How much cash a business has at the start of each month (closing cash of pervious month)
Closing cash
How much cash a business has at the end of each month
How to calculate the net cash
Total receipts - total payments
Opening cash
Closing cash of the previous month
Closing cash
Net cash + opening cash
Reasons for cash flow forecasts
Arranging finances - may persuade the bank to allow business to have an overdraft as it shows the bank are able to make repayments
Targets- forecasted numbers makes it easier for the company to make goals and reach them
Identify deficits-identity where the business may be short of cash , can stop outflows
Surplus
When a business has more receipts than payments
Deficit
When a business has more payments than recipets
How to deal with deficits
promotion eg sales
Redundancy
Cheaper supplier
