First 245 words of the document:
A cash flow forecast is a Management Accounting document, which outlines the
forecasted future cash inflows (from sales) and the outflows (raw materials, wages, etc)
per month for a business over an accounting period.
They help to prepare for those months in which it is forecast to experience a cash flow
crisis (i.e. the business needs to arrange extra borrowing or overdraft facilities to provide
Total £ Jan Feb Mar Apr
Sales revenue 2850 900 850 750 350
Other revenue 650 200 200 100 150
Total cash inflows 3500 1100 1050 850 500
Total cash outflows 3400 700 950 1200 550
Net monthly cash flow 100 400 100 -350 -50
Bank balance 300 600 700 350 300
The business forecasts that are in January will experience cash inflows of £1,100 and
cash outflows of £700, leaving a positive net monthly cash flow of £400.
This is added to the £200 bank balance which existed at the end of December (not
shown on graph), to give a forecasted bank balance at the end of January of £600 (end
In February, the forecasted cash inflows are only £100 more than the forecasted
outflows, leaving a bank balance of £700.
However, in the months of March and April, the business is forecast to experience
negative net monthly cash flows (i.e. its cash outflows are forecast to be greater
than its cash inflows).
This gradually reduces the bank balance to just £300 by the end of April.