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Simulation instructions

The aim of the simulation is to maintain a neutral or positive cash flow throughout a trading year for a small but growing business.

Before entering the simulation itself you should read the supporting notes and these instructions. You should also be familiar (or have printed out) information on the business, the aims of the game, the key information that will need to be used and the initial cash flow forecast statement. These details can be found on the PotArts Ltd. game page. The cash flow forecast statement will need to be completed before you can start the game.

A brief summary of the game:

• Complete and submit the cash flow forecast.
• After submitting your correct cash flow forecast you will be presented with a series of options that allow you to alter the operation of your business. Each option has a link to a page of explanatory text on what the change will mean and the possible consequences to your business. During each month of the game you will be able to change these settings in order to maintain a neutral or positive cash flow.
• After each subsequent submission, there will be feedback on the consequences of your decisions and an animation showing your current situation. There may be external changes affecting your business which occur at random throughout the year. These will appear under the heading 'Important information and events'. When these changes occur, you will have to consider what the impact will be on your forecast and what action to take, if any, to the changes.
• It is recommended that you attempt to work out the effect of any changes you make or what impact the external changes may have before submitting your changes - this will help to minimise the likelihood of mistakes and negative cash flow outcomes.
• Providing you do not bankrupt the business, the game will last for a twelve month period meaning that you will have twelve sets of decisions to make. At the end of the twelve month period (assuming you have managed to survive that long) the game will end and you will be presented with a summary of your performance.

How the game works and what to expect

Completing your cash flow forecast

At the start of the game you will be presented with 'Key information' and a forecasted cash flow form to complete. The 'Key information' gives you the background that will help to inform your decision making as the game progresses. Your cash flow statement covers a one year period and you will also be given information about the expected sales and current price level, costs and so on during this period. From this you have to complete the receipts and net cash flow fields on the forecasted cash flow statement:

• Receipts can be found by multiplying the expected sales volume by the price of the pots.
• The net cash flow is the difference between the receipts and the total payments.

Once you have completed these fields, select the 'Submit cash flow forecast' button. You will be given some feedback as to whether you have calculated your cash flow correctly. If you have made errors you will have to go back and correct your cash flow - remember, if you were submitting a forecast of this sort to a bank as part of a business plan they would expect you to get it right!

Running your business

After submitting a correct cash flow forecast, you should look at the Net Cash Flow. This is the key figure that you need to concentrate on. Your task is to try to manipulate the variables under your control - price, number of vehicles, number of employees and so on, and cope with the external changes that may affect your business at any time in order to maintain the net cash flow at a neutral level or at a positive level. These variables will influence the cash flowing into the business and the cash flowing out of the business. You should change these factors according to your forecasted cash flow in order to ensure that the business stays afloat.

The cash flow model will calculate the effect of your changes and provide you with your actual cash flow statement. You will be able to compare the initial forecast you made at the start with the actual outcome as the months progress. The forecasted cash flow is displayed at the top of the page during each turn of the game, your actual cash flow is displayed beneath it.

How is your business doing?

After each month's submission you will be provided with feedback on the current net cash flow figure. If it is positive, you will be in a sound position but you will have to think about what is likely to happen in the next few months. You can, if you wish, make changes to your business but you will need to be mindful of the impact of the changes you make on the business - not just this month but in subsequent months as well. Throughout the resource, there are guides to help you in your decision making outlining what you are changing and what the consequences of your decisions might be.

If the outcome of your decisions results in a negative net cash flow, you will be given a warning of the situation. You must look at what is going to happen in the coming months and also think about possible changes to prices, vehicles and possibly arrange an overdraft or a loan to help you rectify the position.

You will be allowed some leeway in managing your net cash flow, up to -£5,000 per month. If, however, your net cash flow is in excess of -£5,000 for three consecutive months you will be declared bankrupt! You will receive warnings to this effect in the feedback to enable you to rectify the situation before your business is forced to close.

When you receive feedback on each successive month, there may be external factors that are beyond your control that will change. You will have to factor in the effect of these external changes on your business and react accordingly.

Final considerations

Once the game is over, you will be given a graphical representation of the forecasted and actual cash flow and the forecasted and actual closing balance.

Remember, a positive cash flow is not the same as making profit. What you need to ensure is that you have sufficient funds coming into the business from whatever source - revenue from sales, loans, etc. to cover the costs of running the business - wages, rent, interest payments, etc.

Success, therefore, is ensuring that you survive the year!

Good Luck!

Enter the simulation

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