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Cash and cash flow - EdexcelNet cash flow

The management of cash and cash flow is important as it can prevent a business from failing. Cash flow is the way that money moves in and out of a business and its bank accounts.

Part of BusinessPutting a business idea into practice

Net cash flow

Net cash flow is the difference between all cash inflows and all cash outflows of a business:

net cash flow = cash inflows – cash outflows

Cash flow forecast example:

	Jan	Feb	Mar
Cash inflows
Sales	£8,500	£5,000	£4,000
Rent received	£1,000	£1,000	£1,000
Total inflows	£9,500	£6,000	£5,000

Cash outflows
Wages	£1,000	£800	£700
Raw materials	£1,000	£800	£500
Marketing	£200	£200	£200
Rent	£1,500	£1,500	£1,500
Loan repayment	£150	£150	£150
Total outflows	£3,850	£3,450	£3,050

Net cash flow	£5,650	£2,550	£1,950
Opening balance	£0	£5,650	£8,200
Closing balance	£5,650	£8,200	£10,150

	Cash inflows
Jan
Feb
Mar

	Sales
Jan	£8,500
Feb	£5,000
Mar	£4,000

	Rent received
Jan	£1,000
Feb	£1,000
Mar	£1,000

	Total inflows
Jan	£9,500
Feb	£6,000
Mar	£5,000


Jan
Feb
Mar

	Cash outflows
Jan
Feb
Mar

	Wages
Jan	£1,000
Feb	£800
Mar	£700

	Raw materials
Jan	£1,000
Feb	£800
Mar	£500

	Marketing
Jan	£200
Feb	£200
Mar	£200

	Rent
Jan	£1,500
Feb	£1,500
Mar	£1,500

	Loan repayment
Jan	£150
Feb	£150
Mar	£150

	Total outflows
Jan	£3,850
Feb	£3,450
Mar	£3,050


Jan
Feb
Mar

	Net cash flow
Jan	£5,650
Feb	£2,550
Mar	£1,950

	Opening balance
Jan	£0
Feb	£5,650
Mar	£8,200

	Closing balance
Jan	£5,650
Feb	£8,200
Mar	£10,150

Opening and closing balance

Calculating and interpreting cash flow forecasts

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