2.1 : Planning + Cash Flow Flashcards
What is a suitable business plan ?
Helps finance-providers assess the business model
Provides a structured assessment of the opportunities + risks
Encourages analysis of the competitive position of the business + market attractiveness
Provides a benchmark in which progress can be measured
Helps determine the amount + type of finance required
What are the key contents of a business plan designed to raise finance ?
Business model , Product and market positioning , Management team , Market assessment , Financial forecasts + scenarios , Key opportunities and threats , Investment requirement
Why is cash flow important to a business ?
Because cash flow problems are the main reasons businesses fail, and regular and reliable cash flow forecasting can address many of the problems
What are the benefits of a reliable cash flow forecast ?
Advanced waring of cash shortages , Makes sure that the business can afford to pay suppliers + employees , Spot problems with customer payments , Important part of financial control , Provides reassurance to investors and lenders that the business is being managed properly
What are the main cash inflows ?
Cash sales, Receipts from trade debtors, Sale of fixed assets, Interest on bank balances, Grants + Loans from the bank, Share capital invested
What are the main cash outflows ?
Payments to suppliers, Wages + salaries, Payments for fixed assets, Tax on profits, Interest on loans and overdraft, Dividends paid to shareholders, Repayment of loans
How do you maintain a good cash flow ?
Is updated regularly
Makes sensible assumptions
Allows for unexpected changes
What are the common issues with cash flow forecast ?
Sales prove lower than expected
Customers do not pay up on time
Costs prove higher than expected
What is a cash flow forecast ?
An analysis of estimated cash inflows and cash outflows over a future period and the resulting impact on cash balances.
