KEY TAKEAWAYS - CHAPTER 24 SUMMARY Cash Flow Budget 16 Cash flow budget


A plan that shows a business’s expected future receipts and payments over a period of time.


1. Lenders, investors and grant providers will require a cash flow budget as part of a business plan to access finance.


17


Reasons to Prepare A Cash Flow Budget


2. Can help plan the correct timing for large future purchases 3. Shows months where payments will exceed receipts, giving the business time to act before the problem arrives.


4. Shows which months’ receipts will exceed payments so the business can plan how to use the surplus wisely.


18 19 Net cash Closing cash 20 Deficit 21 Surplus 22


Advice For Negative Closing Cash (Business)


23


Advice For Positive Closing Cash (Business)


24


Advice For Negative Closing Cash (Club)


Total Receipts (A) minus Total Payments (B) Net Cash plus Opening Cash


Planned payments are greater than planned receipts, resulting in negative net cash. Closing cash will decrease.


Planned receipts are greater than planned payments, resulting in positive net cash. Closing cash will increase.


1. Spread out large one-off payments. 2. Arrange a bank overdraft to cover a shortfall. 3. Increase advertising to attract more customers.


1. Increase advertising to promote products to new customers. 2. Build a cash reserve to cover any unexpected payments or future shortfalls.


3. Invest in new equipment to allow the business to produce more.


1. Spread out large payments by arranging a medium-term loan. 2. Organise fundraising events or increase membership subscriptions.


3. Arrange a bank overdraft to cover a short-term shortfall. 4. Delay purchasing new equipment.


25


Advice For Positive Closing Cash (Club)


1. Use the surplus to fund more activities for members. 2. Set aside the surplus as a backup fund for unexpected payments.


3. Invest in facilities such as upgrading the clubhouse or resurfacing a pitch.


257


STRAND 2 CHAPTER 24: Sources of finance and the cash flow budget


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