Business cash budgets

• What are roles of finance?

  To record and maintain financial records, for example cash budgets and income statements

  
  

  pay bills, for example electricity, insurance and advertising

  
  

  pay wages and salaries to employees
• What are some examples of financial records maintained by finance?

  Cash budgets and income statements
• What bills does finance pay?

  Electricity, insurance, and advertising
• What is cash flow?

  All the money that comes into and goes out of the business
• Why must there be more cash coming into a business than going out?

  To avoid liquidation
• What can cause cash flow problems?

  Spending too much on unsold stock
• How can giving customers too long to pay their debts affect cash flow?

  It can lead to cash flow problems
• What is one reason for poor cash flow related to sales?

  Not receiving enough money from sales
• How can owners taking too much money out of the business affect cash flow?

  It can lead to cash flow problems
• What are some strategies for improving cash flow?

  • Look for cheaper suppliers of raw materials
  • Sell equipment or machinery no longer needed
  • Increase marketing activities
  • Offer discounts to customers who pay on time
  • Take out a bank loan
• What are some cash flow solutions and their justifications?

  1. Find a cheaper supplier: Reduces costs, increasing cash available.
  2. Lease machinery: Spreads costs over time.
  3. Sell unused assets: Releases cash for other uses.
  4. Apply for a loan: Covers immediate cash flow issues.
  5. Offer discounts for quick payment: Encourages faster payments.
  6. Arrange extra time to pay bills: Provides time to raise cash.
  7. Increase advertising: Boosts sales and cash inflow.
• What is a cash budget?

  A document that helps manage cash flow
• What does a cash budget show?

  Is prepared in advance and shows the planned monthly cash incoming (receipts) and any planned cash outgoings (payments)
• What is one benefit of a cash budget?

  It can identify potential cash shortages
• What does a cash budget highlight regarding cash flow?

  Surplus or deficit of cash
• What is the opening balance in a cash budget?

  The amount of money available at the beginning of the month
• What are receipts in a cash budget?

  A list of all the money coming into the business
• What are payments in a cash budget?

  A list of all the money expected to go out of the business
• What is the closing balance in a cash budget?

  The cash left at the end of the month after all payments