1.35 Cash Flow Forecasts

If you’ve seen the news recently you will no doubt have heard about a company called Carillion. Carillion’s business involved construction, facilities management and providing ongoing maintenance. Carillion have now gone into administration, and some argue that it overreached itself, taking on too many risky contracts that proved unprofitable. It also faced payment delays in the Middle East that hit its accounts – in other words, it faced a cash flow problem. So cash flow is important whether you are a small business with just one shop or if you are a multi-national concern.

Cash flow is the relationship between the money flowing into a business and the money flowing out.


Think about a music festival. The inflows and outflows for this event might be as follows:

Cash inflows

  • sales of tickets
  • rent from food and merchandise stalls
  • revenue from car parking charges

Cash outflows

  • cost of hiring bands
  • cost of hiring the site
  • cost of hiring a soundsystem
  • cost of hiring security

The organisers must make sure that they can pay everyone on time.

Preparing a cashflow forecast

The video below shows you how to complete Task 1 from this worksheet. After watching it you should be able to complete Task 2 by yourself.

…and if you want to get an idea of what you might be asked about in an exam then take a look at these exam style questions.

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