Cash Flow Forecasting

Mind Map by , created over 5 years ago

A Levels Business Studies (AQA AS BUSS1) Mind Map on Cash Flow Forecasting, created by lj.willis on 04/09/2014.

Created by lj.willis over 5 years ago
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Cash Flow Forecasting
1 Cash Flow = The movement of cash into and out of a business over a period of time
1.1 The timing of and relationship between cash inflows and cash outflows can be crucial to the survival of a business
2 Cash inflows = are the receipt of cash into a business
2.1 Examples include : Sales of goods, payment by debtor, loans received
3 Cash outflows = are the transfer of cash from a business
3.1 Examples include : buying materials, paying expenses, repaying loans, buying capital equipment
4 Net monthly cash flow = the balance of a month's total cash inflow in relation to the month's total cash outflows
4.1 Cash inflows
4.2 Cash outflows
5 Cash flow problems = A business with a negative net monthly cash flow struggle to meet day to day expenditure
6 Cash flow forecast = the process of estimating the size and timing of cash inflows and outflows
7 Cash inflows = cash in from sales
7.1 Cash sales estimated from sales forecast
7.1.1 Difficult for new businesses, may be over or under estimated
7.1.2 To a certain extent, it depends upon the scale and accuracy of research
7.2 Debtor payments estimated from sales forecast
7.2.1 Determined by credit terms offered to customers and their reliability
8 Cash outflows = cash out for purchases and payments
8.1 Payment of fixed costs
8.1.1 These should be easy to estimate on a month to month basis
8.2 Payment of variable costs
8.2.1 If sales are difficult to forecast accurately then costs are as well
8.2.2 Suppliers may change prices or payment terms
9 Net cash flow = The net result of cash inflows and cash outflows each month
9.1 Calculated as...CASH INFLOWS - CASH OUTFLOWS
10 Opening balance = How much the business has at the start of each month
10.1 The closing balance for one month becomes the opening balance for the next
11 Closing balance = How much the business has at the end of each month
11.1 Calculated as...OPENING BALANCE + NET CASH FLOW

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