Syllabus: Pearson Edexcel GCSE Business
Module: Putting a Business Idea into Practice
Lesson: 1.3.3 Cash and Cash Flow

Introduction

Topic 1.3.3 “Cash and cash-flow” sits within Theme 1 of the Pearson Edexcel GCSE Business syllabus: Investigating Small Business. This topic helps students understand how managing money flowing in and out of a business can be the difference between growth and closure. For schools under pressure to improve student outcomes without adding teacher workload, this unit offers a tangible link between classroom content and everyday business survival, bridging academic theory with real-life decision making.

Pearson’s curriculum explicitly links this content to how small businesses manage cash to remain operational and viable. Teaching this unit provides a perfect platform to develop financial literacy, a key skill for employability and lifelong resilience.

Key Concepts

Aligned with the Edexcel GCSE Business Specification, students need to understand:

• Cash and its importance: Cash is not profit. Students must grasp that cash is required to pay suppliers, wages and bills – and without it, a business cannot function.

• Cash-flow forecasting: How and why businesses forecast cash-flow. Students need to interpret, complete and analyse cash-flow forecasts.

• Causes of cash-flow problems: Including overtrading, unexpected costs, late payments from customers or poor cash-flow management.

• Solutions to cash-flow problems: Such as overdrafts, delaying payments, chasing receivables, cutting costs, or increasing inflows.

• Difference between cash and profit: Understanding that a profitable business may still fail if it runs out of cash.

Students should be confident in using and interpreting simple cash-flow tables, including calculating net cash-flow and opening/closing balances.

Real-World Relevance

Cash-flow is a daily concern for real businesses. During the pandemic, many small enterprises failed despite being profitable due to cash-flow interruptions. More recently, businesses across sectors – from independent cafés to e-commerce startups – have faced challenges due to delays in customer payments or rising supplier costs.

A relatable example is a mobile phone repair shop. While the shop may earn revenue each day, it needs to pay staff weekly, buy parts in advance, and manage fluctuations in customer demand. Teaching students to read a cash-flow forecast in this context makes the numbers meaningful.

You could also use seasonal businesses like ice cream vans or Christmas pop-ups to show how timing affects cash-flow and why forecasting matters.

How It’s Assessed

In Pearson Edexcel GCSE Business, students are assessed through two exam papers, with Paper 1 covering Theme 1 content.

Assessment tasks related to cash-flow typically include:

• Multiple choice questions testing basic knowledge (e.g. definitions).

• Data response questions where students interpret or complete a cash-flow forecast.

• Short-answer calculation questions (e.g. calculating net cash-flow or closing balance).

• Extended writing questions that ask students to analyse the impact of a cash-flow issue and evaluate solutions.

Command words include:

• Explain – requires two linked strands or reasons.

• Analyse – requires a chain of reasoning.

• Evaluate – requires supported judgement weighing different factors.

A sample 6-mark question might be:
“Evaluate one method a business could use to improve its cash-flow.”

Enterprise Skills Integration

Teaching cash-flow offers strong links to enterprise skills development:

• Problem-solving: Analysing a forecast and identifying causes of negative cash-flow.

• Decision-making: Choosing between overdrafts, cutting costs or improving sales.

• Numeracy and data literacy: Reading and interpreting cash-flow tables.

• Financial planning: Creating forecasts to support decision-making.

Enterprise Skills tools like MarketScope AI can be used here to simulate cash-flow scenarios, allowing students to adjust inputs and see the effect on financial health. These exercises develop both commercial awareness and decision-making confidence.

Careers Links

Understanding cash-flow management aligns with Gatsby Benchmarks 4 and 5 (linking curriculum learning to careers and encounters with employers).

Relevant roles include:

• Finance Assistant

• Small Business Owner

• Accountant

• Retail Manager

• Startup Founder

For careers leads, this unit is ideal for inviting local entrepreneurs or bank representatives to discuss real-world cash-flow challenges. You might also run a short financial literacy workshop with the maths department.

Cash-flow management is a core skill across sectors – not just in business, but also in creative, health, and third sector careers where budgeting is essential.

Teaching Notes

Tips:

• Use a relatable case study (e.g. a school tuck shop, a local salon) to build a cash-flow forecast.

• Start with visual timelines or diagrams to show inflows vs outflows across a month.

• Reinforce the difference between cash and profit early – students often conflate the two.

• Include low-stakes calculation practice weekly – repetition builds confidence.

Common Pitfalls:

• Misunderstanding the purpose of forecasting (it’s not just about maths – it’s a decision tool).

• Confusing credit sales with immediate cash.

• Forgetting to include key expenses (e.g. rent, wages) in forecasts.

Extension Ideas:

• Run a group project where students build a simple business model and manage its cash-flow across a simulated quarter.

• Use Pitch Deck Analyser to test how well students can justify their financial plans when pitching ideas.