Unit E

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Cash Flow Forecast - a document that shows the predicted flow of cash into and out of a business over a given period of time, normally 12 months.

Inflows/receipts :

The money coming into the business from various sources.

  • Cash Sales - The customer pays at the time of the purchase
  • Credit Sales - The customer pyas in a pre-agreed period after the sale
  • Loans - Bank loans to fund the purchase of assets such as machinery and vehicles
  • Capital Introduced - Money invested from entrepreneurs or shareholders when a business is first set up or looks to expand
  • Sale of Assets - The sale of items owned by the business which are no longer needed in order to bring a short-term cash injection into the business
  • Bank Interest Recieved - Interest paid by the bank on credit balanaces

Outflows/payments :

The money going out of the business for various purposes.

  • Cash Purchase - Items purchased by a business and paid for at the time of purchase
  • Credut Purchase - Items purchased by a business and paid for at a later point in time
  • Purchase of Assets - Non-curent assets that a business is likely to keep for more than 1 year
  • Value Added Tax (VAT) - Businesses that are VAT registered must pay VAT to HM Revenye & Customes (HMRC)
  • Bank Interest Paid
  • Rent
  • Rates
  • Salaries
  • Wages
  • Utilities

Opening Balance - The amount of cash available in a business at the start of a set time period, for example a month.

Closing Balance - The amount of cash available in a business at the end of a set time period, for example a month.

Credit Period :

The length of time given to customers to pay for goods or services received.

  • The longer the credit period, the slower will be the money coming in.
  • Affect the ability of the business to gain credit from its suppliers

Solutions to Cash Flow Problems :

  • Overdraft Arrangements - A business with a fluctuating cash flow cycle should be able to show the

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