Secondary Business - Cash flow 'The bucket'

Level 2 BTEC: Unit 2 - Finance for business

Type of external assessment	This unit is externally assessed using an onscreen test. Edexcel sets and marks the test. The assessment must be taken by the learner under examination conditions.
Length of assessment	The external assessment will be 1 hour
No. of marks	50
Assessment availability	On demand
First assessment availability	November 2013

With the change in the Level 2 specification, the emphasis has changed, putting more pressure on the students to memorise and apply the information they have learnt, for an extended period of time. The major change for this qualification is the emergence of the online testing (or exam!) outlined above. From my point of view as a head of department, I am not sure that this online test will meet the needs of my weakest students and so I have developed some simple image based learning tools for them to help understand the key ideas of finance.

Cash flow: ‘The bucket’

Using the idea of a bucket filling up and emptying, the students can visualise the main components of cash flow. The 3 main areas to focus on are: Inflows, outflows and overall balance.

The attached worksheet is helpful to show the key idea: Inflow needs to be more than outflow or the business will struggle. It allows the students to visualise the different inflows which a business (A hairdressers in the example) would come across. The student can then identify where a business will need to pay money out, whether this is on a regular basis or as a one off. (Bringing in fixed and variable costs)

The worksheet can be altered for more relevant, new or specific examples and can be reproduced to cover varying industries.

The students can then be introduced to ways in which the business may cope with a negative balance between the inflow and outflows.

Cash flow forecasting – learners should: (Achieved)

•  be able to identify inflows and outflows
• explain the purpose of a cash flow forecast, including that it identifies the flow of cash through a business over a period of time
• understand the sources of cash coming into the business (inflows)
• understand the sources and destination of cash leaving the business (outflows)
• identify the impact of timings of inflows and outflows
• understand the benefits of using a cash flow forecast to plan for success in a business (e.g. to produce new goods/services, invest in new resources, expand/reduce activities) and explain the associated risks to businesses of not completing a cash flow forecast
• complete a cash flow forecast from given information, showing individual and total inflows, individual and total outflows, net inflows and outflows, and opening and closing balances
• analyse a business’ finances based on cash flow information and identify possible issues for the business from any cash surplus or deficit

For the cash flow attachment worksheet please click here.

Andrew Dean