2. What is cash flow?
• Cash is notes and coins available for immediate
payments.
• Cash flow is the flow of cash in and out of a
business, over a period of time.
• Cash inflows are the sum of money received by a
business over a period of time while cash
outflows is the exact opposite.
3. Cash inflow
How can cash flow into a business?
• By the sale of goods for cash
• Through payments made by debtors
• By borrowing money from external sources ( e.g.
Loans)
• Through the sale of assets if the business
• From investors
4. Cash Outflow
How can cash flow out of a business?
• By purchasing goods or materials for cash
• By the payment of wages/ salaries to the
employees
• By purchasing fixed assets
• By repaying loans
• By paying creditors of the business
5. Cash Flow Forecasts
A cash flow forecast is an estimate of future cash
inflows and outflows of a business, usually on a
month by month basis. This will then show the
expected cash balance at the end of each month.
6. Uses of cash flow forecast
The uses of cash flow forecasts are:
• Starting up a business
• Keeping the bank manager informed
• Running an existing business
• Managing cash flow
7. Some common terms
• Opening bank balance: is the amount of cash held
by the business at the start of the month
• Closing cash balance: is the amount of cash held
by business at the end of the month, this
becomes the next month opening bank balance.
• Net cash flow: is the difference, each, month
between the inflows and outflows.
8. What cash flow is not!
• Cash and profit are two very different things.
• Profit is the surplus after total costs have
been subtracted from sales revenue and cash flow
is not.
9. How to solve cash flow problems
• Arrange with your bank to borrow money over the
time when you have negative cash flow
• Reduce or delay some of your planned expenses
• Increase your forecasted cash income in some
way( e.g. a part time job.)
• Delay paying for some of your expenses until
cash is available
