Evaluate how Cash flow forecasts, Break even charts, Profit & Loss statements and Financial recording systems can contribute to managing business finances Distinction

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Evaluate how Cash flow forecasts, Break even charts, Profit & Loss statements and Financial recording systems can contribute to managing business finances –Distinction


Financial control is a vital part of any business. If you lose control it will almost certainly result in your business spiraling into bankruptcy. A wise way to avoid this is to simply record your past cash flows, your current patterns and use the information to construct documents I will explain in detail. These can all be made simply by keeping the required information. Do not forget that all of the information from each document cannot tell you exactly how your company will perform in the future, but it can give you a good guide. I will also include relevant pictures to show what these documents should look like.

Cash Flow Forecasts

Cash flow forecasts are a great way to estimate how your company will perform in the future. They are the standard way to find where your business will peak and trough in its revenues. It is also a handy way to see how much money your business has recently if it is up to date, since it lists closing balances. You can also check your trading profit (Sales capital minus costs) and revenue, (Capital from sales) whilst also having your capital from last month and costs from the current month easily displayed. These are helpful for a business because they are quick and relatively easy to make. They can be flawed sometimes because people can sometimes not make realistic estimates or consider all factors, which can result in the company being too optimistic or pessimistic in spending and sales. This could hinder your company more than help it. For this reason, you should wait until it is sensible to make a cash flow forecast. Benefits of accurate cash flow forecasts include detecting overdrafts early on and finding problems, the ability to review your costs and pricing to suit your disposition and being able to renegotiate terms with others, such as banks or creditors. It is also a great document to show to people that may be interested in your business, such as shareholder, (Potential) investors, creditors and lenders. Since it can be helpful to show to a creditor, it is also a helpful way to clear up issues surrounding a company’s liquidity. It is also good to show shareholders and investors since it will give them an easy way to compare with other competing firms.

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Break Even Charts

Break even charts are a method of identifying what prices you will have to set to break even in certain situations, among other things. Although they can sometimes be tricky to get exactly right, knowing what your break even point can sometimes be a big help. Microsoft Excel also has a feature where you can make a break even chart on the computer, which can have less human error in comparison to hand drawn charts. Advantages of break even charts include being able to check many situations before you decide a strategy, to be able ...

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The writer makes some factual errors and too many sweeping statements. They mix up forecasts and statements i.e. a forecast is a prediction and a statement is what actually happened. Both are useful to a business in different contexts.