AS Business Cash Flow Forecasts PDF

AS Business Cash Flow Forecasts Cash Flow Forecast Ways to improve cash flow position Stakeholders Interested in Business...

AS Business Cash Flow Forecasts Cash Flow Forecast Ways to improve cash flow position Stakeholders Interested in Business Accounts Definition: A prediction/estimate of the movement of Improving revenue through increased sales cash into and out of a business over a period of time. and marketing campaign – unlikely to work if Directors – security of position – to measure whether economic conditions are against them. past planning has been success and to aid decision Useful as: Increase prices – will depend on price sensitivity making for future. identifies the timing of cash shortages and surpluses. (PED) – may cause a significant decrease in enhances the planning process – guides the business revenue. Worker – to see whether the business is successful, towards taking appropriate action. Reduce wage bill by making some people which will impact on job security – also if business helps identify where problems might occur and helps redundant – Trade Union would fight this and could afford wage increase. to avoid the business being forced out of business. could result in a strike – staff may leave or supports attempts to raise finance. become de-motivated. Managers – to see whether the business is successful, assists in determining the liability of the new Reduce drawings – will they be able to meet which will impact on job security – also could business business venture. their personal living expenses? afford salary increase – do they qualify for bonus? – Cut costs – this would depend on how efficient has their management been effective? Example: Work out the Net Cash Flow (i) and the Closing they already are, e.g. cutting raw material costs Balance (ii), by finding a new supplier may compromise Shareholder/investors – investors – to see whether quality. the business is successful, which may effect value Reduce the use of outside contractors, e.g. of shares – influencing shareholder wealth and level cleaners. Could they and the staff do this of dividend, which adds to shareholder income – instead? Do they have the time? Would the decisions on keeping, buying or selling. service they offer to their customers suffer? Can they get out of the contract? Customer – may want to know about survival of Chasing-up bad debtors – may generate cash business, which will decide whether it is worthwhile – but may lead to cash problems for customers being a customer – or should contracts be negotiated who may not be able to pay any debts. elsewhere? – also might high profits suggest business Increasing promotions – may lead to increased charging high prices. sales but may also have no impact on sales – will be expensive to set up. Supplier – also may want to know about survival of Cut the advertising budget – could this have a business – to find whether the business is likely to be negative impact on the number of sales? able to pay its trade credit. Find new insurer – will cover still be as good? Invite new shareholders to inject money into the Bank – may also want to know about survival of business – possible dilution of control. business – to find whether the business is likely to be Sale of assets - may lose benefits of the assets. able to pay its loans/overdraft. Net Cash Flow = Total Receipts – Total Payments Re-negotiate terms of the loan - may back more = 2500 – 16920 in the future. Government – as customers – to find how much tax = (-14420) Debt factoring on future invoices but will not get will be collected from the business – does it consider full invoice value. profit to be excessive? – should more tax be levied? Closing Balance = Opening Balance +/- Net Cash Ask bank to increase overdraft limit on a Flow​
short-term basis but extra interest. Competitor – to make comparisons – to aid planning/ = (-2120) – (-345) Extend credit terms with their own suppliers competitive strategies. = (-2465) might cost more as early discount lost.