A cash flow forecast can help to identify where there are potential shortfalls but might also indicate where there are large amounts of cash left at the end of a month or year. Although you may think this is a good thing, if the cash balance at the end of each month is high, it might be an indication that the business is not taking advantage of opportunities. For example, could it use this cash surplus to improve or expand the business?
Cash flow
forecasts are just that, a forecast, and therefore the actual cash flow of the business
should be monitored alongside the forecast to see if inflows and outflows are as
expected, better or worse.
Activity:
E.1.3:
Using the hyperlinked
- cash
flow forecast - identify where there are potential shortfalls which might
also indicate where there are large amounts of cash left at the end of a month
or year.
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