Cash flow refers to a business's cash inflows and outflows. Cash inflows include receipts from customers and loans. Cash outflows include payments to suppliers and workers. Cash flow forecasting predicts future cash inflows and outflows. Forecasts are important for new businesses, fast-growing businesses, and businesses with erratic sales to help plan for and manage cash needs. Negative cash flow occurs when cash outflows exceed inflows. Businesses can improve cash flow by reducing stock levels, increasing credit terms from suppliers, reducing credit given to customers, and increasing sales revenue. Elements of a cash flow forecast include receipts/sales revenue, payments/expenses, net cash flow, opening balance, and closing balance.

1. forecasting

2. What is CashFlow????
Cash flow: the sum of cash payments to a business
(inflows) lessthe sum of cashpayments(outflows)
Cash inflows: payments in cash received by a business,
such as those from customers )debtors) or from the
bank, e.g. receiving aloan
Cash outflows: payments in cash made by a business,
such asthose to suppliers and workers

3. What is cashflow forecasting?

4. What is cashflow forecasting?
Predicting the future cashinflows
and outflows of abusiness

5. Why are forecasts important?

6. Why are forecasts important?
• Theyare particularly important for 3 typesof
business:
1. New firms
2. Fastgrowing firms
3. Firms with erratic sales
Why these types of business inparticular?

7. Why are forecasts important?
• Theyare particularly important for 3 typesof
business:
1. New firms: Basedon market research sothat
they canplan ahead
2. Fastgrowing firms: Prepare to managenew
volumes of cashinflow and outflow,maximise
positive cashflow
3. Firms with erratic sales:Tohelp managewith
months within that year that cashinflow may be
low

8. What is negative cashflow?

9. What is negative cashflow?
When cash outflows are greaterthan
cash inflows

10. How to improve cashflow:
• Reducestock levels (De-stocking)

11. How to improve cashflow:
• Reducestock levels (De-stocking)
• Increase credit from suppliers (TradeCredit)

12. How to improve cashflow:
• Reducestock levels (De-stocking)
• Increase credit from suppliers (TradeCredit)
• Reducecredit to customers

13. How to improve cashflow:
• Reducestock levels (De-stocking)
• Increase credit from suppliers (TradeCredit)
• Reducecredit to customers
• Increase SalesRevenue

14. What are the elements of acashflow
forecast?
1. Receipts:Thepredicted salesrevenue for
each month (also known ascash inflows)
2. Payments: Money the businessexpects to
spend during that time (also known ascash
outflows)
3. Net Cash Flow: The difference between the
total payments and the receipts = receipts –
payments

15. What are the elements of acashflow
forecast?
4. Opening Balance:Themoney that afirm has
carried over from apreviousmonth
5. Closing Balance: Total of the net cash flow
figure and the opening balance = opening
balance +net cash flow

16. Mr Flake’sCashFlow Forecast

17. Mr Flake’sCashFlow Forecast