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3.3 Cash Flow Forecasts – Unit 3: Investigating Financial Control

3.3 Cash Flow Forecasts

Unit 3: Investigating Financial Control

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Contents

Teacher’s notes included in the Notes Page

Flash activity (these activities are not editable)

SoundPrintable activity

Key skills

For more detailed instructions, see the Getting Started presentation

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Accompanying spreadsheet

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Creating a cash flow forecast

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Creating a cash flow forecast

In this section you will learn how to prepare a cash flow forecast.

Case study: Andy’s new car

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How to construct a basic cash flow forecast

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A basic cash flow forecast

What do you notice about the inflows in April?

January February March April May JuneInflowsSales revenue 130,000 150,000 160,000 170,000 185,000 195,000Loans 20,000 0 0 0 0 0Grants 0 0 0 0 0 0Investors' capital 0 0 0 5,000 0 0Total inflows 150,000 150,000 160,000 175,000 185,000 195,000

OutflowsStock 30,000 30,000 25,000 30,000 30,000 30,000Wages 100,000 110,000 110,000 110,000 110,000 115,000Rent 4,000 4,000 4,000 4,000 4,000 4,000Utility bills 1,000 1,000 1,000 1,000 1,000 1,000Interest on loans 2,000 2,000 2,000 2,000 2,000 2,000Taxes 1,000 1,000 1,000 1,000 1,000 1,000Advertising 11,000 12,000 12,000 15,000 12,000 14,000Total outflows 149,000 160,000 155,000 163,000 160,000 167,000

Monthly summaryOpening bank balance 20,000 21,000 11,000 16,000 28,000 53,000Net cashflow 1,000 -10,000 5,000 12,000 25,000 28,000Closing bank balance 21,000 11,000 16,000 28,000 53,000 81,000

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Complete a basic cash flow forecast

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Case study: Andy’s new car

Andy Harris wants to buy a new car to take to university in September. He knows that:

Andy is going to try and cut down on his spending. He estimates that he will spend £30 a month on clothes, magazines and music, and £25 a month socializing with his friends.

At the start of March, he had £450 in his bank account.

A good second-hand car will cost him £2500.

His Dad has agreed to give him £1500 at the end of August as a birthday present to help him buy the car.

He earns £150 a month working for his uncle.

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Assignment: Andy’s new car – a cash flow forecast

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Case study: Andy’s new car

This is what actually happened to Andy:

He spent £40 shopping in May and August.

He worked a few extra hours in June and earned £175.

He spent £80 going to a music festival in April.

He only earned £100 in March.

Use the spreadsheet activity on the next slide to edit Andy’s original cash flow forecast and decide whether he can still afford his car.

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Andy’s new car – revised cash flow forecast

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Assignment: Andy’s yearly cash flow forecast

Andy’s yearly cash flow forecastAndy decides to save over a whole year in order to go travelling. He begins saving in September and plans to travel in October of the following year.

Set up an Excel spreadsheet to create a cash flow forecast for Andy over twelve months.

Use the information you already know about Andy’s inflows and outflows over a six month period to think about what he is likely to earn and spend over a whole year.

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In groups, discuss what you think Andy could do to improve his cash flow. Present your ideas through a short talk or by designing a poster.

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Beat the boss!

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Glossary