Use of Cashflow Forecast

Question 1

Planning DESC

Answer 1

Helps identify where most of your inflows and outflows are coming from. Where these are not adequate it allows the business to put a plan in place to help rectify any cash flow issues.

Question 2

Monitoring DESC

Answer 2

A cash flow forecast needs to be monitored closely in line with actual cash flow of the business

Question 3

Control DESC

Answer 3

When areas of concern occur the business can then try to control this by attempting to increase inflows or decrease outflows. Without the cash flow forecast the business would not be able to control any cash flow issues until they had occurred.

Question 4

Target Setting DESC

Answer 4

Depending on what the business identifies in its cash flow will dictate what targets they set. It may be clear that in certain months the business does not make enough sales due to it being a seasonal business. Therefore they may set a target of diversifying their products portfolio in order to achieve greater sales in months where their core business does not perform well.