GCSE-readyCompleting a cash-flow forecast
A cash-flow forecast predicts the money coming into and going out of a business, month by month. Exam questions ask you to fill in missing figures and say what the forecast shows.
The layout
Cash outflows are money going out: stock, wages, rent, bills, loan repayments, equipment.
Net cash flow = total inflows − total outflows
Closing balance = opening balance + net cash flow
Each month's closing balance is the next month's opening balance.
| April | May | June | |
|---|---|---|---|
| Sales | £6000 | £8500 | £11 000 |
| Bank loan | £5000 | £0 | £0 |
| Total inflows | £11 000 | £8500 | £11 000 |
| Stock | £3500 | £4000 | £4500 |
| Wages | £2500 | £2500 | £3000 |
| Rent | £1200 | £1200 | £1200 |
| New oven | £8000 | £0 | £0 |
| Total outflows | £15 200 | £7700 | £8700 |
| Net cash flow | −£4200 | £800 | £2300 |
| Opening balance | £2000 | −£2200 | −£1400 |
| Closing balance | −£2200 | −£1400 | £900 |
Reading the forecast
By June the closing balance is £900, so the problem is short-term. The owner should arrange an overdraft before April, or delay buying the oven, or pay for it in instalments.
Why cash matters
Cash is not the same as profit. Profit compares revenue with costs over a period; cash is the money actually in the bank. A profitable firm can run short of cash if customers pay late, it buys a lot of stock, or it spends on equipment.
Improving cash flow
Reduce or delay outflows: negotiate longer trade credit with suppliers, lease instead of buying equipment, cut unnecessary costs.
Cover a gap: an overdraft or short-term loan.
A forecast is only an estimate: sales and costs may turn out differently, so it should be updated regularly.
In May, Rise Bakery's opening balance is −£2200. Total inflows are £8500 and total outflows are £7700. Find the net cash flow and the closing balance.
- Net cash flow = £8500 − £7700 = £800
- Closing balance = −£2200 + £800 = −£1400
Answer: Net cash flow £800; closing balance −£1400
Net cash flow = total inflows − total outflows. Closing balance = opening balance + net cash flow, and it becomes next month's opening balance. A negative closing balance warns that the business needs finance or must change its plans.
- Cash-flow forecast
- A prediction of a business's cash inflows, cash outflows and bank balance over future months.
- Net cash flow
- Net cash flow = cash inflows − cash outflows.
- Cash flow
- The movement of money into (inflows) and out of (outflows) a business over a period of time.
- Revenue
- Revenue = price × quantity sold. Example: 400 items at £5 = £2,000.
- Loan
- A sum of money borrowed from a bank and repaid with interest over an agreed period.
- Overdraft
- A facility that lets a business take more money out of its bank account than it has in it, up to an agreed limit.
All GCSE and International GCSE Business key terms and definitions →
Try two quick questions
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2 more questions
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Total inflows are £3600 and total outflows are £4250. What is the net cash flow?
Show the answer
Answer: -650
£3600 − £4250 = −£650.
The opening balance is £2200 and the net cash flow is −£750. What is the closing balance?
Show the answer
Answer: 1450
£2200 − £750 = £1450.
Check you have got it
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- Pearson Edexcel GCSE Business (1BS0) specification, topic 1.3.3
- Pearson Edexcel International GCSE Business (4BS1) specification, topic 3.2
Checked by the GCSE-ready editorial team, 17 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.