Cash flow forecasts 2.1.4
Cash flow forecast - is a statement of the expected cash inflow coming from the sales revenue and expected cash outflow needed to cover production costs. The difference between the inflow and the outflow is the net cash flow , a crucial indicator of the ability of a business to cover its day-to-day running costs. Cash flow is important to a business as it needs it to ensure a positive cash balance in order to meet day to day expenses. It roughly estimates cash flow for up to about two years into the future. The forecast will help potential lenders (including banks) to see what the likely financial needs of the business will amount to. CALCULATING CASH FLOW Opening Balance = what is in the bank on the first day of the month Total cash inflow = all cash entering the business in that month Total cash outflow = all cash leaving the business in that month Net cash flow = Total cash inflow - Total cash outflow Closing balance = Opening balance + Net cash flow FIGUR...