Cash and cash flow - OCRNet 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 ofBusinessOperations, finance and influences on business

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:

JanFebMar
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
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Opening and closing balance
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Calculating and interpreting cash flow forecasts

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