Slides · PPTX · 227 KB · 21 slides
Cash and cash flow forecasting.pptx
Built from the lesson script on 25 September 2026.
EDEXCEL GCSE BUSINESS · PAPER 1
Cash and cash flow forecasting
Putting a business idea into practice
Lesson 4 of 5
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Last Lesson
Putting a business idea into practice
Lesson 4 of 5
Answer from memory before the answers appear.
1
What is break-even?
2
How do you calculate break-even output?
3
What is the margin of safety?
4
What happens to break-even if fixed costs rise?
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Last Lesson - Answers
Putting a business idea into practice
Lesson 4 of 5
1
What is break-even?
The point where total revenue equals total costs.
2
How do you calculate break-even output?
Fixed costs ÷ (sales price - variable cost per unit).
3
What is the margin of safety?
Actual sales - break-even output.
4
What happens to break-even if fixed costs rise?
It rises - more units must be sold.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Learning Objectives
Putting a business idea into practice
Lesson 4 of 5
1
Explain the importance of cash to a business.
2
Explain the difference between cash and profit.
3
Explain cash inflows, cash outflows and net cash flow.
4
Calculate opening and closing balances in a cash-flow forecast.
5
Interpret a cash-flow forecast.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Putting a business idea into practice
Lesson 4 of 5
THE BIG IDEA
Profit keeps a business going in the long run. Cash keeps it alive this week.
More businesses fail because they run out of cash than because they never make a profit.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Why Cash Matters
Putting a business idea into practice
Lesson 4 of 5
Cash is the money a business has available to spend right now - in the bank or in the till.
To pay suppliers
Without cash, suppliers stop delivering stock and materials, and the business cannot sell anything.
To pay overheads
Rent, electricity and insurance must be paid on time, or the business may lose its premises.
To pay employees
Staff expect to be paid on time; if they are not, they may leave.
To prevent business failure
A business that cannot pay its debts when they are due is insolvent, and may be forced to close - even if it is profitable on paper.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Watching the Bank Balance
Putting a business idea into practice
Lesson 4 of 5
Knowing how much cash there is - and will be - is part of the daily job.
Small business owners check their cash constantly, because the bills never stop: suppliers, rent, wages. A cash-flow forecast lets them see a problem coming months before it arrives, while there is still time to do something about it.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Cash or Profit?
Putting a business idea into practice
Lesson 4 of 5
CASH
• The money the business actually has right now.
• Needed to pay bills when they are due.
• Changes the moment money comes in or goes out.
• Short term: without it, a business can fail this month.
PROFIT
• Revenue minus costs over a period of time.
• Includes sales that customers have not yet paid for.
• Worked out at the end of a period.
• Long term: without it, a business cannot survive for ever.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
How a Profitable Business Runs Out of Cash
Putting a business idea into practice
Lesson 4 of 5
Profit counts a sale when it is made; cash counts it when the money arrives.
Customers pay late
A business that lets customers pay in 60 days has made the sale, and the profit, but has none of the cash yet.
Paying for stock up front
A toy shop buys its Christmas stock in September, months before customers buy it.
Buying equipment
A large purchase such as a van uses up cash immediately, even though it will earn money for years.
Growing too fast
More orders mean more materials and staff to pay for before the customers pay.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
PART TWO
Cash-Flow Forecasts
Predicting the cash that will come in and go out, month by month.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
The Parts of a Cash-Flow Forecast
Putting a business idea into practice
Lesson 4 of 5
Cash inflows
Money coming into the business: cash sales, payments from customers, loans, and money invested by the owner.
Cash outflows
Money going out of the business: stock, wages, rent, bills and loan repayments.
Net cash flow
Cash inflows - cash outflows. Negative if more goes out than comes in.
Opening balance
The cash the business has at the start of the month. It is always last month's closing balance.
Closing balance
Opening balance + net cash flow. The cash left at the end of the month.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
The Café's Cash-Flow Forecast
Putting a business idea into practice
Lesson 4 of 5
Item
January (£)
February (£)
March (£)
Cash inflows: sales
5,000
6,000
7,500
Rent
1,500
1,500
1,500
Wages
3,000
2,500
3,000
Stock
2,000
1,000
1,000
Total cash outflows
6,500
5,000
5,500
Net cash flow
(1,500)
1,000
2,000
Opening balance
2,000
500
1,500
Closing balance
500
1,500
3,500
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Working Through January
Putting a business idea into practice
Lesson 4 of 5
Always work in this order.
Using the café's forecast, show how January's closing balance is calculated, and why it becomes February's opening balance.
1
Total cash outflows
£1,500 + £3,000 + £2,000 = £6,500
2
Net cash flow
£5,000 - £6,500 = (£1,500)
3
Closing balance
£2,000 + (£1,500) = £500
4
Carry it forward
January's closing balance of £500 becomes February's opening balance
ANSWER
January closing balance = £500
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Reading the Forecast
Putting a business idea into practice
Lesson 4 of 5
What the café's owner can learn from it.
A difficult January
More cash goes out than comes in, and the balance falls to just £500 - dangerously low if a bill is bigger than expected.
Recovery
Net cash flow is positive in February and March, so the balance rises to £3,500.
Planning ahead
Knowing January will be tight, the owner could arrange an overdraft in advance, delay buying stock, or run a promotion to boost sales.
A forecast, not a fact
The figures are predictions; if sales are lower than forecast, the cash could run out.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Why Businesses Use Cash-Flow Forecasts
Putting a business idea into practice
Lesson 4 of 5
A forecast is an early warning system.
Spot shortages early
See months ahead when cash may run low, and arrange finance before it is needed.
Plan spending
Choose the best time to buy equipment or stock.
Get a loan
Banks usually ask for a cash-flow forecast before lending to a new business.
Compare and control
Compare actual cash flow with the forecast and act if they differ.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Putting a business idea into practice
Lesson 4 of 5
CASE STUDY
Carillion: Profitable on Paper, Out of Cash
Carillion was one of Britain's biggest construction and services companies, building hospitals and roads and employing around 43,000 people. It reported a profit for 2016, but it was waiting months to be paid on many of its contracts while still having to pay its staff and suppliers, and it had built up huge debts. When it could no longer find the cash to pay what it owed, it went into liquidation in January 2018. Carillion showed that profit on paper is not the same as cash in the bank.
2016
Carillion reports a profit
2018
Carillion goes into liquidation
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Key Terms
Putting a business idea into practice
Lesson 4 of 5
Cash
Money a business has available to spend immediately, in the bank or in the till.
Cash flow
The movement of cash into and out of a business.
Cash inflows
Money coming into a business, such as cash sales and loans.
Cash outflows
Money going out of a business, such as wages, rent and stock.
Net cash flow
Cash inflows minus cash outflows.
Opening balance
The cash a business has at the start of a period - last period's closing balance.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Key Terms (cont.)
Putting a business idea into practice
Lesson 4 of 5
Closing balance
Opening balance plus net cash flow.
Insolvency
When a business cannot pay its debts when they are due.
Cash-flow forecast
A prediction of a business's cash inflows and outflows over future months.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Putting a business idea into practice
Lesson 4 of 5
YOUR TASK
Complete the Forecast
15 minutes
A bike repair shop starts April with £800. April inflows are £3,000 and outflows £3,600. May inflows are £4,200 and outflows £3,400. June inflows are £2,500 and outflows £3,900. Draw a cash-flow forecast, calculate the net cash flow and closing balance for each month, and say which month the owner should worry about.
1
Draw the table with three month columns.
2
Calculate net cash flow each month.
3
Calculate the closing balance and carry it forward.
4
Name the problem month and suggest one solution.
WHAT A GOOD ANSWER SHOWS
Net cash flows of (£600), £800 and (£1,400); closing balances of £200, £1,000 and (£400). June needs action because the balance goes negative.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Can I...?
Putting a business idea into practice
Lesson 4 of 5
Explain why cash matters to a business.
Explain the difference between cash and profit.
Explain how a profitable business can run out of cash.
Explain cash inflows and outflows.
Calculate net cash flow.
Calculate opening and closing balances.
Interpret a cash-flow forecast.
openrevise.com
EDEXCEL GCSE BUSINESS · PAPER 1
Summary & Exam Focus
Cash is needed to pay suppliers, overheads and employees, and to avoid insolvency.
Cash is money available now; profit is revenue minus costs over a period.
Net cash flow = inflows - outflows; closing balance = opening balance + net cash flow.
A cash-flow forecast warns of shortages so the business can act in time.
EXAM FOCUS
Explain one reason why a business might be profitable but still run out of cash. (3 marks)
Use the difference in timing: the sale, and the profit, are counted when the goods are sold, but the cash only arrives when the customer pays.
openrevise.com
← → to move, F to present full screen, G for every slide at once.