Cash flow. A cash flow forecast is a document that predicts cash requirements in the future. It helps a business save money for things it may need in the future

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Cash Flow

A cash flow forecast is a document that predicts cash requirements in the future. It helps a business save money for things it may need in the future. Financial problems may arise if the business has more outgoings than income, such as unpaid bills or sudden money loss making the business low on money. Another business could also owe money to yours and go bust.

The business is most vulnerable to cash flow problems when they first start up as this is when there are more outgoings than money from customers. Certain areas, such as production, could have difficulties operating as the costs are too high. Businesses may also have cash flow problems due to other reasons, such as not selling as well as expected.

A business can improve their financial situation by borrowing money from a bank, cutting costs or increasing sales. Businesses use cash flow forecasting to anticipate months where they may have a shortfall and get ready for them by taking action before they happen. It may help the business if they identify areas where the business was weak or strong and change strategy to deal with any problems and maximise potential. The five parts of a cash flow forecast are: Receipts, payments, excess of receipts over payments, opening bank balance and closing bank balance.

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Cash Inflow:

This section shows how much the business (in this case, a garden centre) has loaned from a bank, made in sales and been charged to lease the assets of the business. The major source of income for the garden centre is the public, but for temporary money, the bank can loan money to you.

The garden centre sells plants and seeds, with a café operating also, all of these will need renewing at some point so this will maximise profits. The garden centre has loaned money from the bank in order ...

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**** A pretty thorough analysis of a cash flow forecast. There are some inaccuracies which I have pointed out.