Syllabus: OCR - GCSE Business
Module: 5. Finance
Lesson: 5.5 Cash and Cash Flow
Jump to Section:
Introduction
The topic “Cash and cash flow” in OCR GCSE Business (J204) forms a core part of Unit 5: Finance. This section helps students understand how businesses manage their money day to day—not profit, but actual cash that keeps operations running. It aligns directly with the OCR specification and supports students in developing financial literacy, a key life skill.
This topic goes beyond accounting definitions. It’s about decision-making, timing, and problem-solving—skills that resonate across the curriculum and into careers. Whether students are future business owners, managers or employees, understanding cash flow helps them grasp how businesses stay afloat and make informed decisions.
Key Concepts
According to the OCR GCSE Business J204 specification, students should be able to:
Define cash and cash flow, distinguishing it clearly from profit.
Understand the importance of cash to a business’s survival and operations.
Identify the main inflows (e.g. sales revenue, owner capital, bank loans) and outflows (e.g. wages, rent, stock).
Interpret and construct simple cash flow forecasts.
Analyse the impact of cash flow timings—how even profitable businesses can fail if outflows exceed inflows at the wrong time.
Suggest and evaluate solutions to short-term cash flow problems, such as delaying payments, chasing debts, or arranging overdrafts.
These concepts build naturally into further study, linking with budgeting, financial planning, and wider economic decisions.
Real-World Relevance
The collapse of small businesses due to poor cash flow is regularly reported in the business press. For example, during the COVID-19 pandemic, many viable businesses had to close not because they were unprofitable, but because their inflows dried up while costs continued. Similarly, seasonal businesses like garden centres or ice cream vendors need to plan cash carefully through off-peak months.
A practical case: a local café may make a profit each month but still struggle if supplier invoices are due before the café receives customer card payments. Cash flow forecasting helps manage this gap.
Bringing in news stories or interviews with local business owners adds powerful relevance to this topic.
How It’s Assessed
In OCR GCSE Business, this topic is likely to appear in Component 1 or 2 as:
Multiple choice or short-answer questions (e.g. define “cash inflow” or “working capital”).
Calculation tasks using simple tables to complete or interpret a cash flow forecast.
“Explain” or “Analyse” style questions asking students to explore the implications of specific cash flow issues.
Extended answers evaluating potential solutions (e.g. Should a business use a loan or delay a supplier payment?).
Command words include:
Explain – define and contextualise.
Analyse – explore a chain of reasoning.
Evaluate – assess pros and cons to justify a decision.
Quantitative skills such as calculating net cash flow and interpreting trends are also key here.
Enterprise Skills Integration
Cash flow is an ideal topic for teaching active, applied skills. Students are required to:
Problem-solve: What would you do if your business had a £2,000 shortfall in March?
Make decisions under pressure: Would you take out a short-term loan or cut marketing spend?
Think commercially: Can you delay stock purchases without affecting service?
Enterprise Skills simulations can embed these concepts into fictional but realistic business scenarios where students face cash flow dilemmas, forecast challenges, or must choose funding options—all aligned to the specification.
Careers Links
This topic connects directly to Gatsby Benchmark 4 (linking curriculum learning to careers) and Benchmark 5 (encounters with employers), with relevance to roles such as:
Accounts Clerk
Finance Assistant
Business Owner or Franchisee
Retail Manager
Procurement Officer
Each of these roles requires day-to-day awareness of cash movements and budget control.
Skills like forecasting and interpreting financial data also feed into apprenticeships in Business Administration, Finance, and Retail.
Teaching Notes
What works in real classrooms:
Use real or fictional case studies (e.g. “Jamal’s Streetwear Pop-Up”) to build a cash flow timeline.
Create a blank forecast template and challenge students to populate it using given scenarios—then tweak inputs to show the knock-on effects.
Use Skills Hub or simulation tools to allow students to test their decisions in safe environments.
Common pitfalls:
Students confusing profit with cash (highlight timing differences clearly).
Overlooking regular outflows like wages and rent when creating forecasts.
Struggling with negative cash flow vs negative balance—use colour-coded tables or visual aids to reinforce.
Extension ideas:
Compare cash flow with personal budgeting (what happens if your allowance doesn’t come in until after your mobile bill is due?).
Invite a local entrepreneur to talk through their experience of managing cash flow during start-up.
