Question

Discuss the use of cash flow forecast and financial budget to aid decision making within an organization?

Answer 1

Answer:

understanding your cash flow is vital for your business and forecasting plays an important role in your finances. A cash flow forecast is a document that helps estimate the amount of money that’ll move in and out of your business. It also includes your projected income and expenses. Cash flow forecasts typically cover the next 12 months, but can also be used for shorter periods of time – like a week or a month.

Why use a cash flow forecast?

Cash flow forecasts are primarily used to help the business owners plan how much cash they’ll need in the future.

Cash flow forecasts can:

1)Show you whether your business is meeting expectations. By comparing your actual income and expenses with your forecast, you can see which areas of your business are over or under performing and act accordingly.

2)Help you budget for equipment purchases or identity the need for a small business loan, which is very useful for your tax preparation.

3)Be adapted to see the effects of planned business changes. If you’re planning on hiring, for example, you can add the salary and related costs to see how it’ll affect your business’s financial position.

Explanation:

Answer 2

Answer:

A cash budget details a company's cash inflow and outflow during a specified budget period, such as a month, quarter or year.This helps the company make critical decisions such as creating cash reserves to make arrangements for projected shortages and using excess funds prudently.

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