There are various ways of setting out a projection.

Here is one example:

r Month 1 Month 2 Month 3

I
I
$ $ $
r cash inflows

I xxxxxxxxxxx
xxxxxxxxxxx XXX XXX XXX
XXX XXX XXX

I Total inflows XXX XXX XXX

1 Cash outflows
I

xxxxxxxxxxx XXX XXX XXX

I xxxxxxxxxxx XXX XXX XXX
I Total outflows XXX XXX XXX
-··
Net inflow/(outflow) XXX (xxx) XXX
Cash balances
Opening XXX XXX (xxx)
Closing
·--
XXX (xxx) XXX

Notes:
• Negative figures_are_shown in br ackets_,
• If cash outflows e.xceed cash inflows there__i s c:i negative r}et
outflow.
• At th e end of Month 2 there is.a n egatiye cash c:::lo$ing
balance, so Mo_nth_3 opens witb t hLs_negati\i'. e_cash _
.balan<:~. _. ___ _ ___ ________ . __ _ ____ _____ _
-- -- -· ----
 2019
--
January February March
$
April
$
May
$ $-
June

$ $ -
-
3900 3400 3200 3000
Cash sales 3600 3800
6500 6100 6600 6200
Receipts from 6300 6000
credit customers
4800 4700 4600
-
4100
Payments to 4200 4300
credit suppliers
2900 2700 2800
-
Wages 2900 2800 2700
700 900
-
600 700 800
Utilities 600
3400 2500 1800 1300
1900 2200
Other running
costs
On l January 2019 the business is forecast to have a bank balance of
$1400.
The cash flow projection is:
Homechoice
Cash flow projection for each of the six months to 30 June 2019
May June
January February March April
$ $ $ $ $ $

Cash inflows
3800 3900 3400 3200 3000
Cash sales 3600
6000 6500 6100 6900 6200
Receipts from 6300
credit customers
9800 10400 9500 10100 9200
Total inflows 9900
Cash outflows
4200 4300 4800 4700 4200 4100
Payments to
credit suppliers
2900 2800 2700 2900 2700 2800
Wages
600 600 700 700 500 800
Utilities
1900 2200 3400 2500 1800 1300
Other running
costs
Total outflows 9600 9900 11600 10800 9200 9000

(100) (1200) (1300) 900 200

Net inflow/ 300
(outflow)
Cash balances
Opening 1400 1700 1600 400 (900) 0

Closing 1700 1600 400 (900) 0 200

The cash flow projection will help Katherine identify that she will
probably need to arrange a bank overdraft facility for April and
May 2019.
The cash flow proJ·ection m·,g ht prompt Katherine to re-plan certain
.
payments so that she can avoid the need for an overd ra ft .
 23. Preparing a cash flow projection
Jarel prepares. cash flow projections for h.is business,
. " Parkside
. Trader"
He has supplied the following forecasts fo r th e six
. months ending. ·
30 Septem ber 2019.
- 2019
July I August September
April May June
$ $ $
$ $ $
5700 6000 5900
5900 5500 5800
Cash sales
1800
Additional capital 3100
3200 2900 3200
Payments to 2800 2900
credit suppliers 1800
2000 2000 1900
1800 1800
Wages 900 900
700 700 900
700
Rent 700 500

I 500 400 600

General expenses 400

Jarel forecasts that his business's bank balance will be $900 on

1 April 2019.
Pre pa re a cash flow projection lo r each of the six months ending

30 September 2019.

24. Preparing a cash flow projection

I Rosa prepares cash flow projections for her business, "Island Gems".
She has supplied the following forecasts for the six months ending

31 August 2019.
2019
June July August
April May
March $ $
$ $
$ $ 1100
1000 1200
900 900
1100 1900 2600
Cash sales 2000 1900
2500 2400
Receipts from 1300
1000 1300
credit customers 1400 1100
1200
Payments to 1100 1100
~credit suppliers 900 1100
900 900 700 500
500 800
~Wages 500 300
I 500 400 600
~Drawings 200 600
300
\ '--
RUtilities b •ness's bank balance will be $100 on
\ osa forecasts that her usi
'· 1PMa rch 2019. . . for each of the six months ending
repare a cash flow projection
31 A1 1P1 1c;t ? Ol9 . ·························•·"····•·"·····•·""···"········
Preparing sales budgets
A sales budget is a prediction of the number of units that a business
will sell and their value for a future period. Normally the budget is
prepared on a month-by-month basis. The sales budget is often the
single most important key to future planning because from it derive
so many aspects of a business's future: cash inflows, purchasing or
production requirements, for example.

a Illustration 17
Preparing a sales budget
Dylan manufactures a single product. He forecasts that sales for each of
the three months ended 31 May 2019 will be as follows:

2019 Units
March 420
April 440
May 400

The selling price of the product is $60 each.

Here is the sales budget:

Sales budget for Dylan for the three months
ending 31 May 2019
March April May
Sales units 420 440 400
Sales value $25200 $26400 $24000

··········································································································
Practice questions
25. Preparing a sales budget
Zina has prepared the following forecasts for her business, Galaxy
Products. The forecasts are for each of the three months end in
30 November 2019. g

2019 units
September 180
October 200
November 240

The selling_ price of the product during the budget period will be
$35 per unit for the first two months' changing to $37 perunit1n
· ·
November 2019.
Prepare a sales budget for each of the three months end in
30 November 2019. g
 26 .
•-m••==••
preparing a sales budget
-
wns a small manufacturing business. He has been preparing
car IO
a sales budget for each of the three months ending 30 June 2019.

He estimates that units sales will be 10% higher than those for the
same period in 2018. Sales figures for each of the three months ended
June 2018 were:
30

---
,..-- 2018 Units
April 4600

- May 5200

- June 5300
earl forecasts that the selling price per unit for the budget period will be

$8 per unit.
Prepare a sales budget for each of the three months ending 30 June 2019.
··········································································································
Preparing production budgets
A production budget sets out the number of units to be produced
in order to meet expected sales. It takes account of inventory levels
offinished goods. Th is budget is of great importance because all
produ ction costs are determined from its results.

The usual format for a production budget is:

units
r
XXX
1 Sales
1 Less opening inventory of finished goods
(xx)
Add closing inventory of finished goods xx
i----
Production - XXX
~ --

D mu·stration 18
Preparing a prod uction budget
Dylan (see Illustration 17) has also prepared a production budget
for each of the three months ending 31 May 2019. Dylan's policy is to
maintain inventory levels at one-quarter of the sales for the next month
(Sales for June 2019 are forecast to be 460 units.)

Production budget for Dylan for the three months

ending 31 May 2019
March April May
Units Unit s Units
~Sales units 420 440 400
Openin g inventory (105) (110) (100}
Closing invento ry 110 100 115
J'roduction 425 430 415
······ ········· ···························································································
[91 Practice questions · ,
27. Preparing a production budget
Nyla has been preparing a production budget for each of the three
months ended 31 July 2019.
She forecasts that sales will be:

2019 units
May 1500
June 1600
July 1800

Her policy is to maintain a closing inventory sufficient to cover

20% of the next period's sales. As a result there will be an inventory
of 300 units on 1 May 2019. Nyla forecasts sales of 1900 units for
August 2019.
Prepare a production budget for each of the three months ended
31 July 2019.

28. Preparing a production budget

Ashani manufactures a component used in the production of laptop
computers.
Forecast sales of the component for each of the first three quarters of
2019 are as follows:
2019 units
Quarter 1: January - March 8200
Quarter 2: April - June 7500
Quarter 3: July- September 9300

His policy is to maintain a closing inventory sufficient to cover 5% of the

next quarter's sales.
The inventory on 1 January 2019 will be 410 units. Ashani forecasts
sales of 8800 units for the last quarter of 2019.
Prepare a production budget for each of the Quarters 1-3 of 2019.
··········································································································
Preparing a simple business plan
A business plan is a document that sets out the key ideas behind
a proposed new business venture. It is an important document
because it should ensure:
• everyone involved is clear about the main objectives of the new
business and so is focussed on achieving those objectives
 • everyon~ has thought through the feasibility of the business by
considering any problems that are likely to arise and how the
might be overcome Y
• it attracts po ten ti aI investors in the business.

Agood plan makes it absolutely clear what the business will do and
how it will be successful (i.e. make a profit).

The main sections of a business plan are:

Executive summary
Astatement about what the business will do (the products or services
which will be offered), how it will make money, how it will attract
customers and the amount of finance needed.
Company background
This will include a description of the skills, experience and
qualifications of the key personnel.
Marketing plan
The marketi ng plan sets out answers to the following questions:
• Who are the potenti al customers?
• Is this market likely to grow and how quickly?

Marketing analysis
A statement about competitors, their market share, and the plans to
ensure cu stomers will be attracted away from the competition to the
new business.
Financial plan
A fin ancia l plan wil l include:
• a statement about the business's predicted revenue, costs
(wages, rent, utilities, etc.) and its main suppliers
• capital requirements
• a detailed, three-year forecast of profits, cash flows, etc.

flil Illustration 19
Asimple business plan
Carl and Sabina have decided to go into business selling local produce
at a busy crossroads located near the town of Palmhaven. _The_y need to
, present a business plan to a local bank to support an appl1cat1on for a
loan . They have drafted the following simple business plan: