Business Studies Collins Revision Guide. - StudyGuide.PK

CASH FLOW FORECASTS (2)It is also helpful for the business to compare the actual cash flowwith what was predicted. The business can then see when it canafford to pay people it owes money to and when it can considerbuying more stock or equipment.A cash flow forecast can be shown as a table.Jan Feb Mar Apr MayBank balance b/f 1000 5000 3000 –1000 1000Cash receipts 12 000 10 000 8000 8000 10 000Total cash in 13 000 15 000 11 000 7000 11 000Payments/cash out 8000 12 000 12 000 6000 8000Bank balance c/f 5000 3000 –1000 1000 3000●●●●●This cash flow forecast shows that the business may have a deficitin March but that it should only last one month. The owner ormanager could then either try to improve his cash receipts to avoidthis or seek an overdraft from the bank. He would be able to showthe manager that he predicted that the difficulty would only lastone month.Most businesses would use a computer spreadsheet program toenable them to track their cash flow. This would make the forecasteasy to update.A cash flow forecast is usually expected to be included within abusiness plan for a new business. The bank manager or anybodyproviding capital to help set up the business would check that thepredictions in the cash flow forecast were realistic. They would alsotry to spot any likely future problems.A cash flow forecast can also be shown as a graph so that it is easyto compare the forecast with the actual cash flow.42