AS Business Resources

1. Do Now!
Play the Ice-Cream
Cash Flow game!
10 minutes

2. Cash Flow Forecasting

3. Learning Objectives
By the end of this lesson you should be able to:
1. Explain what cash flow means.
2. Understand the nature and importance of cash flow to
business start-up.
3. Structure a cash flow forecast and understand the sources of
information needed for this.
4. Measure cash flow within a business.

4. What does ‘cash flow’ mean?
Cash flow – is the flow of money in and out of the business.
Cash!
Gives ‘immediate spending power’.
Needed to pay bills and expenses such as rent, taxes, wages, suppliers etc.
Without enough cash in the business, bills cannot be paid and the firm will be
forced out of business.
LO1 Explain what cash flow means.

5. Why is cash flow so important?
Importance!
Cash is always important – both long and short-term.
Cash flow relates to timings of payments to workers and suppliers and receipts
from customers.
Essential!
Time management of payments/ receipts carefully.
Monitoring of the cash flow.
Pay on suppliers and creditors on time.
Don’t be forced into insolvency or liquidation!
LO2 Understand the nature and importance of cash flow to business start-up.

6. How to forecast cash flow
Gemma is an entrepreneur looking to open a sandwich shop in Manchester. As
part of her business plan and to help secure future loans etc, Gemma needs to
provide a cash flow forecast to the bank manager. What cash inflow and
outflows do you think she will need to consider?
Team 1 Team 2
List all the possible List all the possible
cash-inflows for the cash-outflows for the
business. business.
LO3 Structure a cash flow forecast and understand the sources of information needed for this.

7. How to forecast cash flow
Gemma is an entrepreneur looking to open a sandwich shop in Manchester. As
part of her business plan and to help secure future loans etc, Gemma needs to
provide a cash flow forecast to the bank manager. What cash inflow and
outflows do you think she will need to consider?
Cash-inflows Cash-outflows
1. Owners capital injection. 1. Rental for premises.
2. Bank loans received. 2. Fixed costs - electricity, gas,
3. Customer cash purchases. water, electricity, phone bill.
4. Debtors – people who owe 3. Labour costs
you money. 4. Variable costs – food/ stock
5. Creditors – people you owe
money to.
LO3 Structure a cash flow forecast and understand the sources of information
needed for this.

8. What is a cash-flow forecasting
and how does it work?
Cash Inflow –
Money coming in DEFINE:
Cash-Flow
Cash Outflow –
Money going out
Opening Balance (1) 1. What is the
– what is left from purpose?
Net Cash-flow – the previous month/
Difference between year
inflows and outflows 2. What is this
showing us?
3. How does it
help businesses?
Opening Balance (2) – Closing
Closing Balance – Add balance from previous month is
opening and net cash carried over.

9. Over to you!
Cash Flow
Forecasting - Tasty
Cakes LTD
1. Complete the
cash-flow
forecast.
2. Answer the
supporting
questions.
LO4 Measure cash flow within a business.

10. Finally….
Write down 3 examples of a
cash-outflows.
Write down 2 examples of
cash inflows.
Write down 1 definition for
cash-flow.

11. Learning Objectives
You should now be able to:
1. Explain what cash flow means.
2. Understand the nature and importance of cash flow to a
business start-up.
3. Structure a cash flow forecast and understand the
sources of information needed for this.
4. Measure cash flow within a business.