Cash Flow Forecasts and Stakeholders

Flashcards covering cash flow forecasting, improvement strategies, and stakeholder interests in business accounts.

Cash Flow Forecast Definition

A prediction/estimate of the movement of cash into and out of a business over a period of time.

Usefulness of Cash Flow Forecast

Identifies the timing of cash shortages and surpluses; enhances the planning process; helps identify where problems might occur; supports attempts to raise finance; assists in determining the liability of the new business venture.

Net Cash Flow Calculation

Total Receipts – Total Payments

Closing Balance Calculation

Opening Balance +/- Net Cash Flow

Ways to improve cash flow position

Improving revenue through increased sales and marketing campaign; Increase prices; Reduce wage bill; Reduce drawings; Cut costs; Reduce the use of outside contractors; Chasing-up bad debtors; Increasing promotions; Cut the advertising budget; Find new insurer; Invite new shareholders to inject money; Sale of assets; Re-negotiate terms of the loan; Debt factoring; Ask bank to increase overdraft limit; Extend credit terms with suppliers.

Directors' Interest in Business Accounts

Security of position, to measure whether past planning has been a success, and to aid decision-making for the future.

Workers' Interest in Business Accounts

Job security and potential wage increases.

Managers' Interest in Business Accounts

Job security, potential salary increases, bonus eligibility, and assessment of management effectiveness.

Shareholders/Investors' Interest in Business Accounts

Effect on share value, shareholder wealth, dividend levels, and decisions on keeping, buying, or selling shares.

Customers' Interest in Business Accounts

Survival of the business, contract negotiations, and potential high prices.

Suppliers' Interest in Business Accounts

Survival of the business and ability to pay trade credit.

Banks' Interest in Business Accounts

Survival of the business and ability to repay loans/overdraft.

Government's Interest in Business Accounts

Tax revenue, assessment of excessive profit, and potential for increased taxation.

Competitors' Interest in Business Accounts

To make comparisons and aid planning/competitive strategies.