Explain one benefit of cash flow forecasting for a business.

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

1. Award 1 mark for identifying a benefit (e.g. helps avoid cash flow problems/shortfall, helps with planning for future expenditure/investment, helps secure external finance). (B1)
2. Award 1 mark for explaining the benefit in context. (B1)
3. e.g. A cash flow forecast can help a business to identify potential cash shortfalls in advance (B1) so that the business can take action to address them, such as arranging an overdraft, preventing liquidity issues (B1).